World leaders again sanctioned gradual and fundamental based moves in currency markets following another round of G20 discussions which ended in South Korea. Finance ministers from the group also agreed to address the key issue of imbalances created by current-account positions. In particular, the US feels currency imbalances are stretched by exporting countries that maintain large surplus accounts and are cash rich, and those who import more and are burdened by debt and large deficits. China’s tight currency controls, the US Federal Reserve’s decision to print more money and ‘competitive devaluations’ were also addressed. However the key driver in currency markets is eurozone sovereign debt concerns. The Irish economy remains in a critical state and there is potential for another Greece-like crisis which would rapidly depreciate the euro. The single currency has already fallen to six-week lows against the US dollar and almost two-month lows against sterling. The pound continued to rise, buoyed by the Bank of England’s Quarterly Inflation report earlier in the week which significantly reduced chances of further quantitative easing in the UK.

Sterling

Sterling reached an eight-week high against a basket of currencies and almost two-month highs on the euro. The pound continued to garner support from Wednesday’s Bank of England Quarterly Inflation Report which almost certainly takes the UK quantitative easing debate off the table until next year.

US dollar

The US market was closed for the Veteran’s Day Holiday. However, thin liquidity often leads to exaggerated currency moves. The US dollar’s reversal from nine month lows against the euro in the space of one week underpins the current mood in markets.

Euro

The euro continued its slide across the board tumbling to seven-week lows against sterling, six-week lows against the US dollar and close to five-week lows against the Swiss franc. With no significant data released, the single currency continued to suffer from growing anxiety over debt-burdened member nations.

Japanese yen

The Japanese yen remains under pressure as poor local economic data suggests the Bank of Japan may be forced to maintain ultra-loose monetary policy for some time. Deflationary fears persist and slowing exports mean the Japanese central bank may also continue to echo calls for a weaker yen.

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

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