Eurozone troubles continue to drive investors away from the single currency and subsequently the euro fell to yet another all-time low against the Swiss franc. Driving the move was more warnings from rating agency Moody’s who, to the annoyance of policy-makers, continue to have a big influence on market sentiment. Moody’s downgraded large Irish banks and warned that Spanish banks could soon follow. However, with one eye on global risks, investors are still keen to take advantage of higher growth and yield potential and, as a result, the Australian dollar also surged to a new record peak against the single currency. The British pound opens still insight of September lows against the US dollar after more weak consumer confidence data suggests that spending may slow sharply next year. The US dollar and yen remain in demand as traders continue to seek shelter from the eurozone debt crisis and on unwinding of risky ‘carry trade’ positions in which both are initially used as a cheap funding currency.

Sterling

Focus on euro area troubles allowed sterling to produce modest gains against its peers, although the pound remains near September lows against the US dollar on risk aversion ahead of the Christmas break.

US dollar

End of year positioning; risk aversion; improving US economic data including unemployment levels; and a small possibility of the US Fed scaling back stimulus measures. These are all the factors supporting the safe haven US dollar right now and subsequently the greenback reached new two-week highs against the euro as investors also shun the single currency on worries about European government debt.

Euro

The euro tumbled as investors focused on the growing threat of contagion spreading from fiscally strapped Ireland to other peripheral eurozone countries such as Spain. The single currency fell through key support levels to two-week lows against the US dollar whilst sliding by over 0.5 per cent against the Swiss franc to another new all-time low.

Japanese yen

The Bank of Japan held interest rates unchanged at a range of 0 to 0.1 per cent following their final meeting of 2010. No move was expected although markets were particularly interested in any talk on stimulus measures given the fast deterioration of economic conditions in recent weeks.

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

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