The Reserve Bank of Australia raised its cash rate to 4.75 per cent in a surprise move. Risk appetite was boosted further after strong Chinese manufacturing added to the wave optimism. The British pound received further support from the rise in October manufacturing PMI while similar data from the US economy helped ease pressure on the US dollar. As a result, the Federal Reserve may make a less aggressive announcement on quantitative easing than had been initially expected.

Sterling

Sterling is now in sight of almost nine-month highs against the US dollar and one-month highs against the euro. The pound rose after manufacturing data provided further evidence for the Bank of England to refrain from more quantitative easing

US dollar

The US dollar posted modest gains after stronger than expected manufacturing data gave markets more reason to ease bets against the US dollar. A new bond purchasing programme, commonly known as “quantitative easing”, is expected to be announced by the Federal Reserve. Recent data suggests that the Fed can afford to be less aggressive than markets had initially priced in, which is US dollar positive.

Euro

Despite pick-up in risk demand, the euro remains under a little pressure from a stronger US dollar. Investors feel that recent moves away from the US currency and into the euro may have been overdone and as a result the euro remains at risk of profit taking. There was no eurozone data released but spreads between Irish and German bonds rose to another record high which remains a concern for the single currency area.

Japanese yen

The yen fell after reaching record 15-year highs against the US dollar. Strong Chinese manufacturing data and an interest rate hike from the Australian Central Bank increased risk demand in Asian markets which hurt the safe haven Japanese currency.

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