An extremely volatile trading environment saw further record levels posted. The US dollar fell after better than expected retail sales eased fears over a double-dip recession and reduced its safe haven appeal. Riskier currencies such as the Australian dollar posted new record highs against its US rival driven by interest-rate differentials. For similar reasons the Swiss franc reached parity against the US dollar for the first time in almost a year as speculation increased that the Swiss National Bank will raise rates at this week’s quarterly rate setting meeting. Despite mixed data from the eurozone and the UK as a whole, both the euro and sterling found support in risk-on environment. With the US dollar tumbling and again reaching new 15-year lows against the Japanese yen, the Japanese government followed through with recent threats to weaken the yen.

Sterling

Sterling finally found support in risk-on environment reaching almost three-week highs against the US dollar and over two-week highs against the Japanese yen. However, improved sentiment towards the eurozone continues to keep the euro one step ahead of the pound.

US dollar

The US dollar tumbled against its main rivals, reaching one-month lows against the euro. Improved data helped reduce demand for it as a safe haven currency and speculation over quantitative easing further weakened the US dollar. On a positive note, data releases helped reduce fears of a double-dip US recession. However, this did increase the pace of moves away from safe haven currencies into riskier assets to the detriment of the greenback.

Euro

The euro continues to find support from the pick up in risk appetite this week. The single currency moved to one-month highs against the US dollar and Japanese yen. The euro’s support was driven mainly by broader market developments as better than expected US data weakened safe haven demand and intervention from the Japanese government sent the yen tumbling.

Japanese yen

The Japanese yen fell by two per cent against the US dollar in the space of just one hour after Japan intervened in currency markets for the first time in six years. Following months of threatening to take “bold” action against excessive moves, Finance Minister, Yoshihiko Noda, confirmed that the Japanese government had indeed intervened.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/

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