Currency markets are experiencing risk aversion flows. What this means is that safe haven currencies such as the Swiss franc are making gains, while currencies that are deemed as having more risk associated with them are trading lower. As a result, the dollar was able to strengthen in the wake of a warning from the S&P ratings agency, which placed the sovereign rating outlook for US debt on a negative watch. Moody’s, a separate ratings agency, confirmed its AAA rating of US government debt and maintained its positive outlook. The US dollar and Japanese yen have been very big benefactors to the unwinding of carry trade positions.

Sterling

The lack of local economic data has allowed sterling to trade in line with broader market movements. The pound’s losses have not been as extreme as the euro’s losses against the dollar and as a result, sterling has popped to nearly two week highs against the euro.

US Dollar

Currency markets are moving towards a “risk-off” environment going into the holiday weekend. There have been a variety of events that have prompted investors to move into safe havens currencies and away from currencies deemed as being “more risky”. The dollar’s gains are coming at the expense of an overbought euro. Investors have been moved to sell long euro positions after the True Finn Euro sceptic party won a larger percentage of the votes in the Parliamentary elections in Finland and called into question the possibility of a Portuguese bailout.

Euro

The euro continues to feel selling pressure against most major currencies. The euro’s decline comes after a 4-month uptrend has been seen against the US dollar. A healthy pull back in the currency is seen as needed before further advances could take place.

Japanese Yen

The yen has made strong gains as investors unwind carry trades going into the Easter weekend. Japan and the US will be open for trade this Friday, but most other industrialised nations will see markets closed. The yen is trading higher as local investors repatriate funds from abroad. News that the Japanese government is thinking about raising the sales tax to eight per cent has not dented the currency. The government is looking at ways to raise money in order to pay for the massive rebuilding which will be required after last month’s devastating earthquake.

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

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