The US dollar and yen maintained their weaker tone after the International Monetary Fund announced its plan to raise up to $600 billion in order to help support debt-strapped eurozone nations. A successful bond auction in also raised hopes the European Central Bank’s emergency measures are already helping to normalise bond market activity.

Sterling

Sterling fell against the euro subsequent to data showing unemployment in rose to its highest level since 1994. The ILO measure of unemployment in the three months to November ticked up from 8.3 per cent to 8.4 per cent although a much smaller than expected increase in jobless claims did help offset the news somewhat.

US dollar

The US dollar extended its decline after more carry trade activity saw the greenback lose further ground against its higher yielding rivals such as the euro and Canadian dollar. Reports of the International Monetary Fund attempting to raise up to $600 billion is helping to support optimism over US economic growth which appears to be gaining momentum. The IMF plans to boost its lending facilities to Europe’s debt-loaded nations, thus easing tensions in debt markets data on industrial production also helped sooth investor anxiety. Production increased by 0.4 per cent month on month in December and despite the number falling just short of forecasts, it demonstrates a significant rebound from November’s -0.2 per cent print.

Euro

Sales of eurozone government debt continue to suggest the European Central Bank’s emergency measures are taking good effect after bond auctions in both and ran smoothly. On the other hand, separate data showing deposits at the European Central Bank rising to another record high implies banks are still too afraid of lending. Still, the euro has advanced by almost two per cent versus the US dollar since tumbling to 17-month lows thanks largely to an increase in risk sentiment across financial markets.

Japanese yen

The yen went down by 1.3 per cent against the pound as traders continue to grow confident in unwinding safe haven positions. Data showing the Chinese economy not slowing as sharply as expected, coupled with upbeat US data, is helping to brighten the global growth outlook.

Travelex Global Business Payments Malta. (Free phone: 800 733 22) www.travelex.com/mt/

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