The Swiss franc was again the main driver behind currency moves, tumbling across the board and by over five per cent in some crosses during trade. After cutting interest rates last week followed by a pledge to inject more liquidity into financial markets, the Swiss National Bank continued to warn markets that it is prepared to take further action. Comments from central bankers in Switzerland echoed a feeling of verbal intervention aimed at reversing the franc’s astonishing rise since the financial crisis began in 2008. As a result, traders panicked into profit taking as rumours circulated that the Swiss National Bank could even peg its currency against the euro. This scenario became even more likely after governments across Europe shockingly imposed a ban on short-selling aimed at minimising stock market volatility. Surprisingly though, sentiment did later improve after US unemployment data helped fuel a sharp rebound in stock markets which encouraged a little risk taking.

Sterling

The pound recovered after UK Chancellor George Osborne encouragingly stood by the government’s commitment towards fiscal stability using the eurozone crisis as a perfect example of its necessity. There had earlier been growing calls to review spending cuts after riots, looting and arson spread from London to other major cities.

US dollar

Better than expected unemployment data remarkably helped turnaround the mood in equity markets sending the Dow Jones shooting up. Promising signs on unemployment eased concerns of a double-dip US recession, boosted further by last week’s encouraging Non-farm Payrolls report. Subsequently the low-yielding US dollar did lose a little ground on key rivals although a sharp rise on the Swiss franc helped minimise those moves to a certain extent.

Euro

Although still under significant pressure, the euro stabilised after European governments imposed bans on short-selling tactics which were accelerating volatile swings. France, Italy and Spain were among those who clamped down on this negative profit making strategy where traders try to gain by betting on a decline in the price of an asset. The emergency action came after turmoil in French banking stocks had earlier sparked a mass sell-off in European equity markets. Consequently, the rapid fall in confidence spilled over into inter-bank lending markets causing another spike in borrowing costs to levels last seen during the recent financial crisis.

Japanese yen

Pressure on the Japanese government to authorise further intervention action to weaken the yen has been helped by a sharp rebound in stock markets. Sentiment improved in Asian markets and the yen was sold after China warned the US and Europe to tackle their debt mountains but also signalled their intent to help stabilise financial markets.

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