Speculation over US quantitative easing has dominated currency markets in recent weeks and managed to keep eurozone budget deficit concerns out of headlines. Although data indicates that the eurozone economy is performing relatively well in comparison to the UK and US, sovereign debt issue remain a grave risk to stability in the single currency area. The single currency fell across the board, in particular, hit five-week lows against sterling. Investor confidence fell and equity markets headed lower which also prompted a move back into the safe haven Japanese yen and Swiss franc.

Sterling

Sterling shot to over five-week highs against the broadly weaker euro as eurozone sovereign debt resurfaced. Confidence in markets fell which also prompted a pull back in riskier moves and as a result the pound found itself lower against the US dollar, Japanese yen and Swiss franc.

US dollar

The US dollar’s upward momentum after last week’s exceptional non-farm payroll reading continued to gather pace. This time developmentfrom abroad helped to increase the US currency’s appeal as deteriorating eurozone conditions, falling equity markets and investor confidence prompted a move back into the US dollar with most traders still short of the currency.

Euro

The euro fell across the board as investors grow nervous over peripheral eurozone sovereign debt. Quantitative easing expectations in the US have helped mask ongoing problems in countries such as Ireland and Portugal, but concerning bond market activity is now coming back to haunt the euro.

Japanese yen

Japan’s September coincident indicator, which measures the current state of the economy, fell for the first time in 18 months. Deteriorating conditions suggest the Bank of Japan may need to continue supporting a flagging economy through stimulus measures. However, the yen rose, particularly against the euro, after eurozone sovereign debt concerns increased the yen safe haven appeal.

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