The euro weakens by over a cent against the US Dollar

The euro weakened by 1.42 cents (0.99%) against the US dollar yesterday, finishing the day at $1.4158.

• In early trading yesterday the single currency weakened against the dollar, following comments from officials that a downgrade in the US sovereign credit rating would not put Asian central banks off buying US Treasuries. Those with a direct knowledge of Asian policymaking said there were no alternatives to the liquidity afforded by the dollar.
  
• The dollar also rose on the back of worse-than-expected US ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI figures. After their release some investors speculated that, contrary to popular sentiment recently, we may not really be on the cusp of a global economic recovery. They therefore looked to the perceived safety of the greenback to protect their capital.
  
• Falls on global equity markets did little to halt this flight to safety, with both the DOW and NASDAQ suffering falls. However, it was the confirmation from Asia that the dollar remains the world’s reserve currency of choice which really drove the greenback’s gains throughout the day.
  
• In trading so far today the euro has clawed back some of yesterday’s losses, as investors continue to digest yesterday’s less positive data and consider whether it was a reality check or just a blip on the road to recovery.
  
• The European Central Bank is to deliver its latest interest rate decision at 12.45 BST today, whilst in the US Unemployment Claims figures are due out at 13.30 BST. Fed Chairman Ben Bernanke is also due to speak at 13.45 BST.