Demand for the kiwi remained strong yesterday, but it has lost ground in the wake of comments from Ben Bernanke

The pound edged down against the kiwi as rising risk appetite in the market offset the BoE’s decision to hold their monetary policy unchanged.

• Investors continued to buy into the higher-yielding New Zealand dollar, encouraged by rallying global equity markets and a broadly weaker dollar.
  
• In the UK, the BoE kept interest rates at 0.5% and decided against extending the quantitative easing programme as some had feared.
  
• However, the decision only gave the pound a muted boost against the kiwi, as investors had already priced the news into the market.
  
• In trading this morning, the kiwi has trimmed its gains as investors lock in some profits and as comments from the Fed Chairman suggested that the US may need to tighten monetary policy, spurring a slight return to the US dollar.
  
• However analysts have noted that overall market sentiment towards the kiwi is still pretty bullish, and that any upward movement for the pound is likely to be as a result of profit taking, rather than decreasing demand for kiwi assets.

The aussie continues to trade strongly, supported by risk appetite in the market

The aussie climbed a further two cents yesterday as figures revealed rising employment in Australia, and as rising risk appetite supported strong demand for high yielding currencies.

• The Australian dollar continued to push higher as encouraging data from the labour market gave investors further cause to buy into Australian assets.
  
• The recent rate hike to 3.25% has increased the yield gap between the two currencies, and the recent downturn in unemployment has simply reinforced the sentiment that Australia is at the forefront of the global economic recovery, strengthening aussie demand.
  
• Additionally, gold prices pushed record highs for the third straight day yesterday, which supported demand for the commodity driven aussie dollar.
  
• The pound has slipped below the 1.77 mark in trading this morning, though its rate of decline has slowed following comments from Ben Bernanke
  
• The Fed Chairman spoke of the possibility of tightening the US monetary policy which has led some investors to trim their long positions in the aussie dollar.

Euro advanced against the greenback, buoyed by a relatively upbeat ECB rate statement

The single currency climbed to a two week high of 1.4815 yesterday as investors continued to sell the dollar to fund riskier trades.

• The single currency returned to its recent upward trend, initially climbing half a percent, as investors took up dollar selling in the wake of further evidence of global economic recovery.
  
• Australian employment data revealed a rise in jobs in September, reinforcing risk appetite and triggering broad dollar selling as its haven appeal weakened.
  
• The single currency held its gains in the afternoon after the European Central Bank left interest rates unchanged at a record low 1.0%, as the market expected.
  
• In his following statement, the ECB President, Jean-Claude Trichet told reporters that “the euro-area economy is stabilizing and is expected to recover at a gradual pace.”
  
• Additionally, Trichet was not as forceful about the need for a strong dollar as many had expected him to be, allowing the single currency to close up at 1.4793.
  
• The single currency has trimmed its position in trading this morning, after Ben Bernanke indicated that US monetary policy may have to be tightened as a recovery takes hold.

Pound advanced vs a weakened dollar yesterday, supported too by a hold in the UK's QE programme

The pound climbed just over a cent (0.6%) against the dollar, buoyed by the BoE’s decision to keep its assets purchase scheme on hold.

• In early trading sterling moved up against a broadly weak dollar, supported by expectations that the BoE would keep interest rates unchanged and maintain its current level of quantitative easing.
  
• The dollar also came under pressure, falling broadly as rising equity markets fuelled demand for riskier assets at the expense of the safe haven US currency.
  
• Dollar selling was led by positive employment data in Australia, which spurred investors to relinquish positions in the greenback in favour of higher-yield currencies, favouring an upward movement in the sterling/dollar pair.
  
• At midday, the BoE announced no change to their current monetary policy, which allowed the pound to advance further, reaching a ten day high of 1.6117.
  
• However, sterling did cap its gains as Mervyn King left the door open for further quantitative easing in the future.

The sterling/euro price closed relatively unchanged yesterday as both the MPC and ECB held rates.

Sterling was unable to build on Wednesday’s gains, as trading between the pair held steady following a relatively muted market response from the two interest rate statements.

• Yesterday morning, the pair remained tightly range bound as investors held back from taking positions ahead of the rate statements from the two central banks.
  
• Analysts noted that people had taken sterling a lot lower recently and maybe now they were beginning to think that the BoE would not extend quantitative easing
  
• At midday it was revealed that the BoE did decide to hold both the interest rate and the asset purchase scheme at their current levels.
  
• However, sterling was unable to build on an intra-day high of 1.0916, as ECB President Trichet avoided seeming too dovish over the eurozone’s recovery.
  
• Trichet did speak of the need to be “prudent and cautious” over the coming months, but he acknowledged that the eurozone economy was stabilising, recovering at a gradual pace, which enabled the single currency to rebound in the afternoon.