Daily currency report

The Dow Jones Industrial Average rose to a two-year peak, the highest since the collapse of Lehman Brothers in 2008. Earlier comments from a Chinese official, who endorsed the eurozone’s efforts to contain the sovereign debt crisis, helped fuel the move which also encouraged a little risk taking in currency markets. However, after managing to find a little respite, the euro came back under pressure. Sterling fell sharply across the board after data highlighted the UK’s precarious fiscal position and, along with the euro, the pound fell to an all-time low against the Swiss franc as investors continue to be attracted by the “Swissie’s” allure as a sanctuary from global risks. Furthermore, both currencies fell to record lows against the Australian dollar as investors remain attracted by higher growth and yield potential in Australia. Although the dollar came under a small amount of pressure as higher equities reduced demand for lower yielding currencies, the greenback held firm ahead of the final reading of Q3 GDP which is forecast to rise.

Sterling

Sterling fell sharply across the board after data highlighted the UK’s precarious fiscal position. Public borrowing levels surged to a record high for November, adding further pressure on the coalition government to tighten spending and raise taxes in 2011.

US dollar

Although the dollar came under a small amount of pressure as higher equities reduced demand for lower yielding currencies, the greenback held firm ahead of the Q3 GDP final reading. The greenback is heading towards three-month highs against the euro with investors gearing up for an upward revision to recent growth figures.

Euro

The euro fell further and has now lost over five per cent of its value against the Swiss franc in December as investors continue to worry that the current debt crisis could still have a long way to run. While eurozone leaders have done very little to inspire confidence in the area’s ability to manage sovereign debt, rating agencies continue to provoke speculative attacks against the single currency.

Japanese Yen

Surprisingly, the yen weakened, snapping a five day gain against the euro after rising equities and a shock pick up in Japanese exports spurred demand for more risky alternatives. Consequently, the yen opens trading at new seven-month lows against the Swiss franc, and down against the US dollar.

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