Daily Currency Report
Overview
The yen was again under pressure following the Bank of Japan's decision to leave interest rates on hold at 0.25 per cent. Elsewhere, it was another good day for sterling, which remains strong across the exchanges.
GBP
Sterling hit a fresh two-year high against the euro, and an eight-year high versus the yen as investors continue to price in the probability of another interest rate rise from the Bank of England following last week's surprise increase to 5.25 per cent.
USD
The greenback rose to a four-year high against the yen, buoyed by generally strong US data. A stronger than expected mid-Atlantic manufacturing survey for January and a rise in US home construction enhanced dollar sentiment.
EUR
The French trade deficit is likely to swell to record levels in 2007 as imports continue to outstrip exports in Europe's second largest economy. Recent euro strength has largely been a by-product of higher interest rates. In turn, the stronger euro has rendered exports less competitive.
JPY
The Yen remains caught-up near foyear low against the dollar, and near eight-year lows against the pound following decisions to hold rates at 0.25 per cent. With interest rates for other currencies so much higher, the yen suffered, as investors use it in "carry trades" i.e. borrowing in yen and investing in other, higher yielding currencies.