Concerns over Ireland defaulting on their debt obligations were significantly reduced ending days of uncertainty. The head of the Irish Central Bank, Patrick Honohan, finally confirmed that Ireland is in talks over a possible bailout which could be worth “tens of billions”. The news helped ease fears over eurozone sovereign debt and equity markets immediately sprung back into life. Riskier currencies benefited as investors dumped the safe haven Japanese yen, US dollar and Swiss franc in favour of higher yields. However, the US dollar’s demise was a little more surprising after another batch of positive data. US unemployment fell and manufacturing activity improved but the news was not enough to support the greenback. Sterling, also encouraged by improving risk appetite and positive Irish developments, rose against its peers. The pound found further support from healthy retail sales and improving industrial activity.

Sterling

Sterling firmed, buoyed by more UK data which suggests that the economy is in better shape than many had expected. After reaching record highs in August and September, UK public borrowing figures for October improved in line with expectations. Further good news came after the Confederation of British Industry reported that UK manufacturing orders improved in November.

US dollar

The greenback climbed against safe haven rivals Japanese yen and Swiss franc to six-week and two-month highs respectively. However, a likely bailout for the Irish economy helped ease eurozone sovereign debt concerns. As a result, equity markets and risk appetite jumped, putting the US dollar under pressure against riskier rivals.

Euro

The euro is still under broad pressure as markets focus on peripheral euro area members and their difficulty in attracting international investors. However, the single currency did manage to recover as the announcement eased fears that Ireland could default on its debt obligations and markets immediately turned positive. Equity markets surged, investors again sought after higher-yielding ­currencies, and the euro rose from seven-week lows against the US dollar.

Japanese yen

The yen fell almost across the board following reports that Ireland is in talks with the EU, ECB and IMF over a possible bailout package. The news helped reduce uncertainty over eurozone peripheral sovereign debt which had fuelled strong safe haven flows into the Japanese currency.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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