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Daily currency report

Overview

The US dollar’s trade weighted index, which tracks its performance against a variety of currencies, is fast approaching two-month highs after the US Federal Reserve gave no indication it plans to add to its quantitative easing program again. The US currency also found additional support from local retail sales data which jumped to a five-month high, and from results of the Fed’s latest bank stress tests that highlighted the strength of the country’s banking sector. The euro found it difficult to compete, dropping to new three-week lows even after another forecast-beating German investor sentiment report. In contrast, sterling managed to keep pace to an extent, helped by a sharp rebound against its more risky counterparts, including the euro, after UK trade data topped analysts’ expectations. The Swiss franc was another currency that suffered from a strong shift into the greenback while the Swiss National Bank’s upcoming monetary policy meeting is worrying investors in case policymakers add to recent measures designed to weaken the franc. Currencies from the Baltic region are under pressure ahead of the central bank meeting in Norway. The Norges Bank is forecast to keep its target rate at 1.75 per cent but may highlight the region’s vulnerability to Europe’s debt troubles.

Sterling

Sterling unexpectedly rallied, rising by over a per cent against the euro after Britain’s latest trade data added to signs the UK economy will return to growth this quarter after contracting in the final months of 2011.

US dollar

The US Federal Reserve’s Open Market Committee concluded its March monetary policy meeting and gave investors a more cheerful-looking assessment of the health of the world’s largest economy. The Fed noted the recent turnaround in employment prospects and consumer demand but sill pledged to keep its benchmark interest rate near zero until 2014 in order to continue supporting growth.

Euro

For once the euro tracked developments outside of the eurozone and fell to a new three-week low versus a recharged US dollar after the US Federal Reserve offered a less dovish outlook on monetary policy. Focus on the US economy also dampened the impact of the positive German investor sentiment data.

Japanese Yen

The yen continued to slide against the more popular US dollar, tumbling towards 11-month lows after the US Federal Reserve gave no clear indication that it still plans to add to its asset-buying program; unlike the Bank of Japan.

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

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