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Daily currency report

Overview

Markets again focused on the euro, with the single currency remaining under heavy pressure, after rating agency Fitch announced that it had cut Ireland’s sovereign debt rating. Boosted by a healthy export-led recovery and strong jobs data the Australian dollar jumped to a record all-time high against the euro. Higher oil and raw material prices also benefited the commodity-linked Canadian dollar. Sterling eased off two-week highs against the US dollar after UK trade balance figures were mixed and the Bank of England, as expected, kept monetary policy and its asset purchases program unchanged.

Sterling

Sterling eased off two-week highs against the US dollar, after UK trade balance figures were mixed and the Bank of England, as expected, stood firm on monetary policy and its asset purchases program. The Bank of England left interest rates at 0.5 per cent and quantitative easing at £200 billion.

US dollar

US weekly jobless claims improved and nervousness over recently announced tax-cut extensions eased, sending the US dollar lower. Planned fiscal relief by the Obama administration had initially resulted in falling US bond prices and higher yields, as investors worried about the deterioration of US government debt. However, those concerns fell as markets focused more on its short-term impact of boosting economic growth, helping to support a little risk appetite.

Euro

The euro tumbled to a record all-time low against the higher yielding Australian dollar and the single currency remains under significant pressure. Rating agency Fitch downgraded Ireland’s sovereign debt rating and media reports suggested that the Irish opposition party will stand against the country’s emergency bailout. Although the Irish government remains confident that it will secure the backing it needs, the uncertainty is weighing on the minds of investors.

Japanese yen

The yen snapped back, ending a run of losses against its main rivals as global risks increased the allure of the Japanese currency as a refuge. Although investors remain deeply concerned about the health of Japan’s economy, broader market concerns regarding China pushed the yen higher.

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

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