Sterling remained in the headlines for the second day running after rising to one-week highs against the US dollar and advancing further against the euro. The US dollar weakened after investors questioned the long-term fiscal health of the US economy after President Obama secured the support he needed to extend tax-cuts for another two years. The safe haven yen fell but more so on growing concerns over the health of the Japanese economy. The Swiss franc, another currency used as a refuge in times of risk aversion, surprisingly held steady, supported in large by its own advance on the weaker US dollar. The Aussie dollar benefitted from strong Australian employment data while the New Zealand dollar tumbled.

Sterling

Sterling climbed to one-week highs against the US dollar and is now within touching distance of recent two-month highs against the euro. The pound advanced on more evidence of a strong recovery in the UK’s manufacturing sector which could help drive the economy through tough public spending cuts.

US Dollar

The US dollar’s recent ascent eased and the greenback fell to one-week lows against the British pound as investors grew a little nervous over US fiscal debt. Markets had earlier cheered news that tax-cuts, which were introduced in the Bush-era, would now be extended for two more years. Equity markets surged on increased optimism over the US economic recovery with tax relief seen as the equivalent of another $900 billion liquidity injection from the Fed. Although global risks remain, this prompted a little risk taking and investors dumped the safe haven US dollar.

Euro

German industrial production surged by 2.9 per cent on the month to October, almost three times higher than the forecasted one per cent increase. Although the eurozone’s largest economy continues to drive growth in the region and remains unscathed by debt woes, the news failed to lift the euro. The single currency remains close to recent two-and-a-half-month lows against the US dollar after IMF director, Dominique Strauss-Kahn, again highlighted that the euro zone remains in trouble and the future is more uncertain than ever.

Japanese Yen

The yen fell to one-and-a-half-month lows against the Swiss franc and remains insight of two-month lows against the US dollar on the back of concerns that the Japanese economy may still require further stimulus from the Bank of Japan.

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

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