Daily currency report

Risk appetite is high at the moment and is supporting the euro and so-called commodity currencies, while weakness is being seen in the safe haven franc and US dollar. These flows could change as traders head into the weekend. Portugal has received a sovereign rating downgrade from two ratings agencies. EU leaders have agreed to expand the European Financial Stability Facility, but only in June. There is a state election in Germany this weekend, which could weaken Chancellor Angela Merkel’s position if her party is seen losing votes. The situation in Libya and Japan remains unclear as geopolitical tensions in the Middle East continue to rise.

Sterling

Sterling is trading against the euro at levels not seen since November of last year. Against the US dollar, sterling opens near previous lows. However, the pound’s slide was halted after the dollar started to come under some selling pressure.

US dollar

The US dollar index is back down near 15-month lows seen earlier this week as investors continue to add risk to their portfolios. The broader market sentiment remains positive suggesting that the dollar could weaken further against the euro and sterling. Against the Aussie dollar, the US dollar is trading close to a 29-year low as investors continue to pile into commodity related currencies as equity markets continue making gains.

Euro

The euro is being driven higher in anticipation of April’s interest rate increase. Currency traders are largely disregarding the impact that the resignation of Portugal’s PM has had on debt and credit default swap markets. Typically, widening yield spreads have knocked the euro lower, but the relative disregard for these developments suggests that currency traders have taken into account the likelihood of Portugal going to the bailout fund.

Japanese yen

Movement in the Japanese yen continues to be controlled by the threat of currency intervention from the G7. Developments at the troubled nuclear reactor continued to dominate headlines. The situation continues to be grave. Economic data released in the overnight session showed deflationary tendencies persisting within the economy, but until more is learned about the nuclear situation, movement in the local currency will continue to be guarded by officials.

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