Bond traders panicked after news broke of an unsuccessful German debt auction, suggesting that Europe’s sovereign risks are creeping further into its core members. Although headlines were in fact a little misleading, the damage had been done and the euro sank to new record lows while also suffering from a number of disturbing reports on the health of the eurozone economy. Increased demand for safer investments kept sterling on its path towards two-month lows versus the US dollar despite the Bank of England meeting minutes calming quantitative easing worries.

Sterling

Sterling moved higher versus the euro after minutes from the Bank of England’s latest policy meeting helped alleviate concerns of further currency-devaluing quantitative easing. Sterling also found support in other currency crosses, particularly against the Australian dollar and Norwegian Krone, after eurozone economic and government debt risks moved up a gear which shattered demand for riskier assets. Subsequently, the pound also breached fresh six-week lows against the safer US dollar.

US dollar

US economic reports failed to stir trade in currency markets and the US dollar moved almost in-step with broader sentiment. As a result, the greenback posted fresh multi-week highs against the single currency and UK pound as investors’ squared positions ahead of Thanksgiving holiday.

Euro

Europe’s economic and government debt risks moved up a gear after reports on key fundamentals pointed towards an imminent recession, while investors appeared to be turning cautious towards even German bonds.

Japanese yen

The Japanese yen is closing in on two-month peaks versus the Australian dollar as declining stock markets and escalating eurozone risks continue to undermine demand for carry trade action. Below-par Japanese and Chinese data in recent months is also weighing on investors’ mind-set across Asia. Large corporations in Japan are repatriating funds at an alarming pace which also supported the yen to new multi-week highs against both the euro and British pound.

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

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