Sterling fell back towards six-month lows against the euro after the much-anticipated announcement on public spending cuts while the greenback was again under selling pressure as markets regained their appetite for risk. The Japanese yen rose to new 15-year highs against its US counterpart, however, G20 discussions should keep the Bank of Japan quiet on currency intervention to weaken the yen. Rising equity markets and risk appetite also pressured the safe haven Swiss franc, particularly against the rising euro. As the single currency again remains the currency of choice rising to six-month highs against sterling and remaining around eight-month highs against the US dollar.

Sterling

Sterling fell back towards almost six-month lows against the euro as uncertainty grows over the future health of the UK economy. The UK currency did, however, manage to recover somewhat overnight, largely thanks to a falling US dollar which helped provide support.

US dollar

The US dollar came back under broad selling pressure after investors concluded that the Chinese economy is robust enough to withstand tighter monetary policy. This saw the US dollar dumped in favour of higher-yielding currencies.

Euro

Positive remarks from German Chancellor Angela Merkel helped support the euro. However, broader market activity was the real driver in allowing the single currency to jump against the US dollar and sterling on the day. Reduced concerns over a Chinese-led global slowdown helped improve risk appetite and investors resumed selling the US currency on expectations of another round of quantitative easing. Both moves combined to propel the euro back towards recent record highs, although the upcoming heavy line-up of PMI indicators present a risk.

Japanese yen

There was no significant local data or comments from Japanese authorities moving the yen. Instead, the safe haven currency found direction from developments abroad. Improving confidence in global markets following China’s surprise move to hike interest rates saw the yen’s safe haven appeal diminish.

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

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