Daily currency report

The Swiss franc catapulted to all-time highs against the US dollar, euro and pound as investors scramble for shelter from escalating global risks. Despite US lawmakers passing an agreement to raise the US government’s borrowing threshold along with new deficit-cutting measures, rating agencies have put the US on negative watch. However, driving the sell-off in stock markets was more troublesome US data suggesting the world’s largest economy is heading for another hard fall. Global buyers shunned the dollar in favour of more stable reserve assets which also sent the price of Gold to a new record. The cost of borrowing for both the Italian and Spanish governments shot to record peaks which added to contagion fears within the eurozone, sending the euro sharply lower against key rivals. Ongoing UK and Japanese headwinds added to a risk adverse sentiment, prompting market players to sell currencies and hold more stable investments such as government bonds. Keeping both the pound and US dollar vulnerable are widespread fears that economies such as the UK and US may return to recession as their respective recoveries falter.

Sterling

Despite the gloom surrounding the UK economy, sterling managed two-month highs against the euro as investors fret over the ongoing eurozone sovereign debt crisis. However, a string of recent bad data has pressured the pound to a record low against the Swiss franc while falling towards multi-month lows against the Japanese yen with both currencies being used as refuge from global risks.

US Dollar

Sunday’s last-gasp proposal to raise the current US government borrowing limit and introduce deficit reduction measures received its final vote, allowing the world’s largest economy to step back from the brink of default. Rating agencies then reaffirmed the country’s triple-A status but placed the economy on negative watch on fears over future spending and tax cut feuds. Investors remain unconvinced in regards to long-term borrowing but it was mounting worries over US growth which sent stock markets plunging across the world.

Euro

Despite chronic government debt worries, the euro has arguably over-performed in recent months as global investors continue to see the euro as a suitable alternative to the US dollar as the world’s reserve currency. However, relief from the recent Greek bailout has fast worn off with contagion again threatening to engulf the single currency which plunged to record lows across the board.

Japanese Yen

The yen continued its ascent against almost all major rivals, driven by both euro zone and US government debt troubles, as well as fears over US and global growth.

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