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.

Sterling lost ground to the kiwi yesterday but is up nearly three cents today following a comment from NZ's opposition leader

The pound was lower in trading on Wednesday, coming under pressure from the minutes from the Bank of England’s latest committee meeting and closing down at 2.2446.

• The minutes revealed a lack of consensus among the committee members over the level of monetary stimulus measures needed at this stage of the economic recovery.
  
• The report also reiterated the slow growth prospects for the UK economy and warned that inflation rates could stay below the 2% target even well into 2011, which was another sterling negative.
  
• However, in trading this morning the kiwi dollar has been broadly sold as investors pare back their riskier positions.
  
• In addition, comments from New Zealand’s opposition leader on the method in which monetary policy should be conducted has given investors further reason to take profits.
  
• Currently the pound is at a 10-day high against the kiwi, up nearly three cents on the day, hovering above 2.27.

A weak aussie made hesitant gains against the pound yesterday following a dovish report from the BoE

Sterling dropped back half a cent in trading yesterday to hover marginally above 1.80 against the aussie as investors picked up on notes from the latest BoE policy meeting.

• The minutes reiterated the possibility of further reducing the base interest rate in order to ease credit conditions, a policy that many thought was no longer in question.
  
• However, the pound did not drop as sharply as it did elsewhere with demand for the aussie also under pressure as US equities traded in the red, dulling risk appetite.
  
• Analysts also noted that the investors remained cautious towards the Australian dollar after the RBA expressed hesitation over a further rate rise this year.
  
• The pound has recouped its losses this morning, climbing back toward 1.89. Analysts have cited the fact that investors’ are looking to lock in profits as year-end approaches following a long rally which carried the aussie to a 15-month high against the US dollar.

Euro made gains against the dollar yesterday but has relinquished them this morning as investors pare back "riskier" positions

The single currency traded strongly against the dollar, recovering losses incurred on Tuesday, to close the day back up near 1.50 at 1.4963.

• The dollar slipped back as the President of the Federal Reserve Bank of St. Louis, James Bullard, said past experience indicates policy makers may not start to raise interest rates until early 2012.
  
• The euro pared some gains after data showed tame underlying US inflation data and a decline in housing starts lasts month, suggesting a US recovery will be a slow one.
  
• US housing starts tumbled 10.6% in October to their lowest level in seven months, which did little to enhance the outlook for the economy and lent some support to the dollar.
  
• Analysts also noted that traders were taking profits yesterday in the wake of the greenback's biggest rise in three weeks, with fresh data doing little to alter the view that US interest rates will remain at record lows well into 2010.
  
• In trading this morning, the euro has once again relinquished its gains, currently trading down 0.6%, as traders take profits from carry trade currencies and pare back “risk” positions.

Sterling was under pressure yesterday as the minutes revealed indecision over the extension to QE

Sterling was under pressure in trading yesterday, losing half a cent to the dollar as a report revealed a split vote over the extension of quantitative easing among the MPC members.

• Sterling was pushed to session lows after the minutes showed a three-way split of the asset purchase scheme: one member had voted for an increase of £40 billion, where as one was in favour of no extension at all. The other seven all agreed upon the £25 billion that was actually implemented.
  
• Analysts noted that the inclusive nature of the minutes suggested that further monetary easing was still on the table, which weakened sterling.
  
• In addition, the committee discussed the merits of cutting the base interest rate from the current 0.5%. Although they concluded that it was not currently necessary, the mention of it dulled demand for the pound.
  
• The dollar extended gains after weak US housing data reduced appetite for risk. The Commerce Department reported that US housing starts dropped last month to an annual rate of 529,000, from a revised 592,000 in September.
  
• The pound has lost further ground this morning, currently down a further cent, as softer equities during the US and Asian sessions dampen risk appetite.

Bank of England minutes proved tough for sterling, which lost considerable ground to the euro

The pound depreciated for the first time in five days against the euro, losing 1.0% from its intra-day high at 1.1311 following the release of the minutes from the latest BoE policy meeting.

• Sterling lost ground after the Bank of England minutes revealed a three-way split in the decision to increase asset purchases by £25 billion at its meeting earlier this month.
  
• Among the nine Monetary Policy Committee members, one, David Miles, called for a £40 billion increase, while BoE chief economist Spencer Dale, favoured no increase at all.
  
• Analysts said the minutes left the question of whether the central bank will increase quantitative easing beyond its current £200 billion target largely unanswered. The door was open to more although such a prospect looked unlikely.
  
• Sterling also came under pressure after a survey showed that UK factory orders fell this month at their slowest pace since December, although export demand was at its strongest since April.
  
• Meanwhile, investors will be keeping an eye on any positive prospects for sterling from merger & acquisition talks as a bidding war mounts for UK confectioner Cadbury Plc.
  
• The pound may also find some support today should UK retail sales data, released at 09:30, follow market expectations and reveal a month-on-month rise.