Daily currency report

The US dollar capitalised on risk aversion, strengthening once again against the other major currencies. Investors continue to back the US dollar following the Federal Reserve’s apparent lack of interest in further quantitative easing. Instead, speculators decided that global risk factors far outweighed high yielding investment opportunities, plumping for the dollar as a safer store of value. This move was buoyed by weekly jobless claims surprising to the upside. With little economic data to focus on, sterling inevitably slid against the greenback.

Sterling

The pound flirted with five-week lows against the US dollar as renewed global growth fears boosted demand for defensive assets. The UK’s poor economic fundamentals kept weight on sterling with the current economy mired in recession. Sterling did hold on to strength against the euro as traders have taken the view that the UK’s economic prospects were on a better footing then that of their counterparts.

US dollar

Global growth concerns continue to support the safe have dollar, reaching new five-week highs against sterling. The dollar held near session highs after weekly jobless claims surprised well to the upside, posting at four lows. Weekly claims dropped a robust 26,000 to 350,000 – the least since March 2008. Investors had expected a reading of 372,000 in the latest period from a revised 376,000 the prior week.

Euro

The euro continued its recent downward march, sinking to June 2010 lows against the dollar and retained four-year lows against sterling. Debt crisis uncertainty, coupled with ECB rate cut has taken its toll on euro sentiment. With rating agency Fitch downgrading Italy’s credit rating to two notches above “junk status” and the delayed launch of the eurozone’s permanent rescue fund, the €500 billion European Stability Mechanism, has injected fresh uncertainty. The ESM had been set to become operable, but that has been postponed at least until a German court decides whether it can shoulder a bigger load to tackle the debt crisis.

Japanese yen

Industrial output in Japan was revised higher for the month of May but this data was largely ignored following comments from the Japanese Finance Minster Azumi. He once more warned investors that he would take “decisive action” to weaken the yen following on from recent rapid appreciation.