After facing weeks of relentless selling pressure, the US dollar rebounded and moved away from record low levels against several rival currencies. As a result, both sterling and the euro fell away from eight-month highs with no significant UK or eurozone data helping to support either currency.

Sterling

Sterling fell sharply from almost eight-month highs against the US dollar. An inconclusive speech from the US Federal Reserve Chairman, Ben Bernanke, helped the US dollar reverse its recent decline. Mr Bernanke’s comments also saw the US dollar rebound against the euro which allowed sterling to move away from recent record lows against the single currency.

US dollar

The Federal Reserve chief confirmed that there appears “to be a case for further action” but warned that the Fed must act “with some caution”. The word caution has led many investors to anticipate a smaller than expected increase in quantitative easing at the Fed’s November meeting. Mr Bernanke’s comments gave investors a reason to buy the US dollar and cover their extremely short US dollar positions.

Euro

European Central Bank head Jean-Claude Trichet contradicted last week’s comments from fellow member Axel Weber. According to Mr Weber, the ECB should abandon their bond-purchasing programmes (QE), however Mr Trichet completely disagreed. The factious news is likely to weigh on the euro with the single currency already under pressure from US dollar buying as global investors take profit on recent currency moves.

Japanese yen

The Japanese yen rose against most major counterparts, most notably to almost one-month highs against the euro as global uncertainties increased safe haven demand. Adding to this move was a downward revision to Japan’s August industrial production which dropped from -0.2 to -0.5 per cent on the month.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/