The kiwi continues to post fresh 12-year highs against the pound today despite a drop in risk appetite

The pound gained 0.2% against the kiwi yesterday, as investors felt that they could have gone too long on high yielding currencies.

• Sterling reversed its slide against a strong kiwi dollar, building on the bullish run of European equities.
  
• Investors were also concerned that the strength of the kiwi was a result of over buying and was set for a correction, which resulted in slight profit taking.
  
• However, the pound’s downward trend has continued again in trading this morning, with the pound briefly posting a low below the psychological 2.3000 level, as concern for the stability of the UK economy resurfaces.
  
• It was revealed today that Lloyds did not have sufficient capital to spurn a government led asset protection scheme, which has sent the pound plunging, and is currently trading 0.5% down against the kiwi.

The pound has relinquished gains against the aussie yesterday and has continued to slide further today

Having gained steadily throughout the day, the pound lost ground in the afternoon as global equities stumbled, eventually closing 0.13% down.

• Sterling was able to reverse its slide in early trading yesterday, as the aussie fell victim to light profit taking, with investors forecasting that the higher-yielding currency may be unable to sustain its bullish run.
  
• However, the pound turned negative as reports that British regulators had set tougher-than-expected terms on Lloyds’ proposed exit from a government scheme.
  
• The report strengthened claims about the ongoing fragility of the British economy and allowed the aussie to recoup losses.
  
• Overnight, Asian markets followed those in the US in turning negative, pulling commodity prices down, however sterling has failed to capitalize on weaker demand for higher-yielding assets, currently trading 50 cents down for the day.

The single currency continued to advance yesterday, but has slid sharply today as investors covered short positions

The single currency advanced for the fourth straight day yesterday, reaching its highest point since September last year at 1.4768.

• Risk appetite was maintained yesterday, as better-than-expected unemployment claims in the US and strong building permits figures climbed to their highest point since December 2008.
  
• Additionally, the euro was pushed higher as the Philadelphia Fed business index rose to 14.1 points in September from 4.2 in August, beating market expectations of an increase to levels around 8.0, spurring investors to sell the greenback and buy higher-yielding assets.
  
• Movements in the markets though were relatively muted, with the euro struggling to break through the 1.4750 level.
  
• Some analysts are now hypothesizing that the dollar could be replacing the yen as the new carry trade, explaining its recent weakness.
  
• However, the selling of the greenback has abated today, allowing it to edge back up against the single currency, as investors cover short positions in the wake of the dollar’s slide during the week.

Dollar recovers over a cent against the pound as risk appetite eases

The pound relinquished gains yesterday as US markets fell for the first time this week, with the price closing down 0.3% at $1.6451.

• Sterling initially edged up against a weak dollar, as higher equities buoyed investor sentiment, with the FTSE on a five day rally.
  
• The dollar slipped further after data showed US housing starts and building permits in August rose to their highest level since November, raising risk appetite.
  
• Additionally, the Philadelphia Fed business index rose substantially in September, enabling the pound to briefly stretch over 1.6500.
  
• However, the dollar recovered it losses as US equities fell, with t he Dow Jones falling 0.08% and the Nasdaq down 0.30%.
  
• The greenback has continued to rally this morning, as investors reacted negatively to news that the FSA said that Lloyds Banking Group did not have sufficient funds to spurn the government’s Asset Protection Scheme.
  
• The dollar has already recovered over a cent (0.8%), as investors also cover short positions, with the price currently trading around 1.6340.

Sterling slides sharply on retail data and UK bank worries

The pound slid 0.5% against the single currency yesterday, as weak economic data and news concerning Lloyd’s bank reduced demand for sterling.

• Sterling wiped out early slim gains against the single currency after surprisingly weak retail sales data reinforced the view that UK interest rates will stay at record lows for some time to come.
  
• Retail sales remained unchanged in August from July, to disappoint market expectations of a 0.2% monthly increase, a sign consumers are cutting back on spending as unemployment rises.
  
• Separately, a survey from business group, the CBI, found that orders for UK manufactured goods remained weak , further dampening demand for sterling.
  
• However the real blow for sterling came following news that the UK had set tougher-than-expected conditions to the potential exit of Lloyd’s bank from a state-run scheme to protect its assets.
  
• The pound has continued to slide sharply this morning, already posting an intra-day low of 1.1098, as investor sentiment in the UK economy weakens further.