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Daily currency report

Overview

Bernanke tied the Federal Reserves so-called QE3 business-borrowing and consumer-spending motivation plan to US unemployment. This means that traders can continue to expect risk-taking pocket money from the Federal Reserve until the US jobless rate comes down from over eight per cent where it has been stuck now for almost four years.

The yen could tumble from near seven-month highs after Japan issued another intervention warning and before the Bank of Japan meets to discuss its own yen-weakening policy measures.

Sterling could begin to wobble near record highs in front of upcoming Bank of England minutes and UK economic data while eurozone data is likely to indicate a looming recession for the shared currency area.

Sterling

The British pound has made little fuss of stepping over recent four-month highs against a shrinking US dollar and is now approaching one-year highs after the Federal Reserve unleashed a third quantitative easing plan to support the US economy. However, Vince Cable’s rally is still lagging behind the euro’s stronger advance and the pound is also losing value against its more yield-heavy rivals.

US dollar

Chairman Ben Bernanke finally fired up the Federal Reserve’s money-spinning helicopter and landed a third quantitative easing container, pretty much where analysts had anticipated, perhaps setting up another explosive day for the US dollar. The greenback has already declined by over three per cent against a group of currencies since the beginning of the month but monetary policy announcement could now turn that decline into something of a freefall.

Euro

The Federal Reserve’s decision to unleash another quantitative easing programme to help spur faster economic growth in the US appears to have diverted even more traffic away from the US dollar and in the direction of the euro. The single currency has now gained by as much as 4.5 per cent against its US rival as the Federal Reserve dilutes the dollar’s value through monetary easing, while the European Central Bank has helped safeguard the euro with its new bond-buying intervention programme.

Japanese yen

The Japanese yen spiked to seven-month highs against the battered US dollar but pared some of those gains after policymakers in Japan threatened to intervene in FX markets. Finance Minister Jun Azumi warned that Tokyo will take action against what he sees as more speculative flows out of the dollar and into the yen.

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