Kiwi slid sharply yesterday as traders bought back into the US dollar

The pound rallied over three cents, or 1.5%, against a broadly weaker kiwi dollar yesterday as traders sold off their higher-yielding investments in the wake of sliding stock prices.

• Sterling was able to hit a ten-day high against the New Zealand dollar, which came under pressure from profit taking in carry trades that had been put on earlier in the year.
  
• In addition, investors were quick to trim their holdings in higher-risk currencies in the wake of falling equity and commodity prices.
  
• Overnight, both the Nikkei and Shanghai Composite lost ground following similar falls in the US session, which drove the kiwi lower.
  
• In trading this morning, the pair are trading steadily around the overnight closing price. With little economic data out, the price is likely to take its lead from broader equity prices and profit taking habits.

Aussie came under heavy selling pressure yesterday as traders took falling equities as a sign to book profits

A raft of profit taking in higher-yielding currencies enabled a weak pound to gain ground against the aussie in trading yesterday, closing nearly a cent and a half up.

• After Wednesday's consolidation, markets reverted to selling risk yesterday amid much talk of early position unwinding for year-ends.
  
• Having been one of the year's best performing currencies, investors hurried to lock in profits in the aussie, with declines in both oil and gold reinforcing support for the lower-yielding currencies.
  
• Analysts gave noted that whilst the aussie is likely to remain strong going into next year with global interest rates still low, the Australian dollar is susceptible to further downward pressure as profit taking increases in the final weeks of the year.
  
• In trading this morning the aussie is recouping some of its losses, currently trading around half a cent higher hovering below 1.81.

As the year nears its end, the investors are beginning to cash profits, supporting the US dollar

The dollar gained ground versus the euro yesterday, as a weaker tone in equity and commodity markets reinforced support for low-yielding currencies.

• The rally in equity and commodity markets stalled yesterday, encouraging investors to pare back exposure to risk and buy back the low-yielding greenback.
  
• Analysts said some traders were already taking risk off the table heading into the year end, wary that the rally in risky assets may have been overdone and that economic data has not been as rosy as forecast.
  
• Traders also said that the bout of dollar buying this week has been partly seasonal with demand coming from overseas corporates ahead of the year-end in addition to investors closing their dollar shorts.
  
• The currency pair remains trapped in a stalemate between support at $1.4800 and resistance at $1.5050, with trader's sensitive of taking the price higher following recent efforts by the ECB to talk the single currency down.

Lower equities and an easing of risk appetite is keeping the dollar trading broadly higher

The pound was down another half a percent against the dollar yesterday following weak UK borrowing data and an easing of risk appetite.

• Data showed that Britain's public finances deteriorated at a much sharper pace than expected last month, taking public borrowing as a share of GDP to its highest on record.
  
• Analysts said the borrowing figures highlighted the need for the UK government to rein in borrowing or face the possibility of a ratings downgrade.
  
• The data also took the shine off positive UK retail sales figures, which saw sales rise 0.4% in October having stagnated in the previous two months.
  
• In addition, risk appetite was taken off the table after major European equity markets fell back over a percent, a trend which was followed on the US indices.
  
• Investors took the opportunity to continue taking profits from higher-yielding currencies, which gave the greenback further support.
  
• In the afternoon, a positive reading from the US Philadelphia Manufacturing Index did cap the dollar's gains, but it has made further ground this morning pushing the price down near 1.66.

The pound is continuing to recede from recent highs against the euro following further evidence of high UK borrowing

Sterling continued to lose ground to the euro yesterday as UK borrowing data underlined Britain's deteriorating finances, while a sell-off in high-risk currencies also kept the pound under pressure.

• Data revealed a much larger UK budget deficit for October than the market had anticipated. The figure came in at £11.4 billion, against a predicted rise of just £6.7 billion, which undermined demand for the pound.
  
• Underlining Britain's enormous debt burden and shaky recovery, the Organisation for Economic Co-operation and Development said yesterday that the UK needed a concrete plan to cut its ballooning budget deficit, while downgrading its 2009 GDP forecast.
  
• Data also revealed that UK retail sales rose at a rate of 0.4% in October following two months of stagnation. The figure took October's annual sales growth to its highest since May 2008, however the news was overshadowed by the budget deficit.
  
• Sterling was also under pressure following as investors broadly sold off risky assets in the wake of falling global equity prices.
  
• In trading this morning there is has been little change from the overnight closing price, though ECB President Trichet gives a speech at 10:30, which could lead to some market movements.