Momentum in currency markets is back with the US dollar. Uncertainty is unsettling investors which is forcing them to put risk to one side and seek safer assets for now. Upcoming discussions between world leaders, which could again echo calls for a stronger US dollar, is one factor. Another which is supporting safe haven flows is ongoing concerns over Ireland and the country’s growing difficulty in luring investors. Confidence in the Irish economy and the eurozone’s ability to manage the sovereign debt risks of its member countries is tumbling. As a result the euro fell across the board. Sterling reached almost six-week highs against the single currency. However, the pound also gave way to a stronger US dollar with disappointing UK trade data further weighing on the UK currency.

Sterling

Sterling edged closer to six-week highs against the euro, although this paints a misleading picture for the pound. Sterling’s sharp rise against the single currency is being driven largely by speculation over Ireland and the potential failure of the former “Celtic Tiger” economy. However, sterling is back under pressure from UK data which continues to stir up talk of quantitative easing.

US dollar

The US dollar rose across the board as investors continue putting risk to one side and seek shelter. Underpinning this mood is the US dollar’s rise to two-week highs against the euro after falling to nine-month lows just last week. A key factor which has led to this sharp turnaround in currency markets is the eurozone sovereign debt story which is weighing heavily on risk appetite and the euro in particular.

Euro

Concerns over Ireland are swelling which is increasing uncertainty over the fiscal health of the eurozone economy. Uncertainty over troubled peripheral member states is unsettling investors and is likely to weigh further on the single currency. The euro has fallen to two-week lows against the US dollar, three-week lows against the Swiss franc and almost six-week lows against sterling.

Japanese yen

Japanese consumer confidence fell for the fourth consecutive month, adding to weakening sentiment among businesses. Deteriorating economic conditions are negatively affecting individuals and the data is another blow for the country’s economic recovery. Despite gloomy domestic news, the yen continued to firm as investors seek its safety from ongoing eurozone jitters although the Japanese currency is failing to keep pace with a stronger US dollar.

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

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