Daily currency report

Traffic in currency markets continued to move one way with traders letting more air out of the US dollar’s tyres while pumping money into riskier investments ahead of Ben Bernanke’s conference. The Federal Reserve chairman will announce the latest monetary policy strategy for the economy which appears to be in need of more stimulus. The US dollar sank to fresh lows against the euro, British pound and a long list of units offering better returns on expectations that the Fed will now launch its third round of growth-boosting quantitative easing. The euro remains the chief beneficiary of the dollar’s demise and could make further progress after Germany lifted a weight on the euro by voting in favour of Europe’s incoming bailout facility. The pound has also added another cent to its advance, supported by promising unemployment data from the British economy.

Sterling

The pound’s climb against the US dollar reached another new high, touching fresh four-month peaks after another set of encouraging employment statistics from the UK bolstered the British currency’s allure. Despite overall UK unemployment nudging higher in the three months to July, the more up-to-date claimant count numbers offered further evidence that Britain’s Olympic support had arrived just at the right time for the economy.

US dollar

The US dollar has now tumbled by an incredible two per cent against a basket of currencies since last week’s depressing US non-farm payrolls employment report. Investors seem to believe that the data could be the final signal the Federal Reserve was looking for before opening up its third container of bond purchases to help support the economy. The greenback sank to more lows against the euro, British pound and a list of growth-linked currencies such as the Canadian dollar on Wednesday as traders ready themselves for what could be another multi-billion round of dollar-diluting quantitative easing.

Euro

Germany’s top court ruled in favour of the country’s participation in Europe’s new and improved bailout facility, the European Stability Mechanism, giving the euro an even longer stepladder to help it climb over significant price barriers against its major trading rivals. Investors had looked a little shaky ahead of the decision, in which lawmakers had to decide whether or not Berlin’s promised contributions to help put up the new €500 billion war chest would in reality reduce Germany’s control over its own budget. Although the ruling came with conditions attached, the euro marched to fresh four-month highs against the US dollar as Europe makes further progress on easing the debt crisis. As a result, investors quickly added Chancellor Angela Merkel’s name to the back of the European Central Bank’s new intervention policy to help safeguard the euro.