Positive economic data from NZ, keeps the kiwi rallying higher vs sterling

The New Zealand dollar advanced for the third consecutive day yesterday, as demand for kiwi assets remained high and as sterling weakness becomes ever more apparent.

• The kiwi gained another two and half cents (1.1%) yesterday after the BoE announced that it was perfectly content with a lower currency exchange rate and was unlikely to initiate any type of tightening into its monetary policy for the foreseeable future.
  
• The kiwi also continued to be supported by positive economic data from New Zealand, which supported claims that the RBNZ is considering raising interest rates.
  
• The New Zealand currency has found support today after the G20 did not indicate any imminent withdrawal of stimulus measures, triggering a rush back into higher-yielding assets.
  
• Initially the kiwi lost ground following disappointing local trade data released late last night, but it has rebounded strongly, climbing 0.75% in trading so far today.

Aussie hits new highs on sterling weakness and a rise in demand for higher-yielding currencies

Selling pressure on the pound and demand for higher-risk currencies saw the aussie advance to a fresh twenty-year high of 1.8464 against the pound.

• Remarks by Bank of England Governor Mervyn King to a regional newspaper published yesterday underscored the central bank's lack of concern about the weakness of the pound, which sent the currency spiraling.
  
• The aussie received further support as investors shifted funds into higher-risk currencies after the US Fed bolstered expectations that interest rates would remain low for some time.
  
• Risk appetite was also encouraged after the G20 meeting, where a statement showed signs that that global stimulus measures would remain in place, buoying demand for the Australian dollar.
  
• In trading this morning, the pound’s downward trend has continued as confidence in the currency remains weak, with the aussie pushing on another cent with trading currently around 1.8450.

Euro lost ground vs the dollar following an easing in risk appetite

The greenback continued to rally against the single currency yesterday, buoyed by a rise in risk aversion, to close the day at 1.4660.

• The dollar was under pressure yesterday after Wednesday night’s Federal Reserve meeting left investors with the message that US interest rates will remain very low for a long time.
  
• The euro also made gains against the dollar as the German Ifo Business climate survey rose to its highest level in a year in September, though it did undershoot forecasts of a stronger advance.
  
• However, the US dollar turned higher in the afternoon, after a report showed that sales of existing homes in America unexpectedly dropped in August, the first decline in five months.
  
• The euro also erased gains after major central banks, including the Fed, announced they were scaling back some emergency lending facilities.
  
• These gains were added to as US stocks turned negative in the afternoon, which further eased risk appetite in the market.
  
• This morning, the euro has recouped some of its losses after a statement from the G20 encouraged speculators to sell the low-yielding greenback.

Sterling weakness drags it down below 1.60 following King's comments

The pound slid 1.7% against the greenback yesterday as momentum to dump the pound snowballed following comments from King that lent his support to a weak currency.

• Sterling was at a two and a half month low against the dollar after comments from Mervyn King left FX markets in no doubt the Bank of England was comfortable with a weaker pound.
  
• A meeting set up between the BoE and London-based economists to clarify policy also worried investors who maintained their bearish sentiment toward the pound, pushing it lower.
  
• An easing of risk appetite added support to the dollar after data revealed a decline in US existing home sales from the previous month and undershooting forecasts.
  
• Additionally, as the US markets came online, equity markets took a turn into the red, which supported demand for the haven currency, and brought the price to a close of $1.6064.
  
• In trading this morning, sterling has tumbled to a four month low against the dollar as a break of the 1.60 level triggered a wave of stop loss sales.

The pound's decline continues, as confidence in the currency is undermined

Sterling went into its steepest daily decline against the single currency in 5 months yesterday, losing 1.2%, after Mr. King revealed that he was content with the current value of the pound.

• Sterling hit its lowest euro price since early April, extending broad losses after Mervyn King said that a weak pound was supporting a necessary rebalancing of the UK economy.
  
• The euro was also supported by a further rise in business confidence in Germany. Although expectations for the Ifo economic survey were not matched in September’s report, the modest increase reflected optimistic future expectations for economic recovery.
  
• Demand was further eroded as the Daily Telegraph reported yesterday that the Bank of England was set to meet with economists in a "crisis" meeting designed to stem alarm and confusion over the QE program and the weakness of the pound.
  
• Additionally, once the pound broke below the 1.10 level, automatic sell off points were triggered, driving sterling down to a near six month low of 1.0922.
  
• The pound has slid further in trading this morning, losing another 0.5%, and currently trading around 1.0900.