US dollar strengthens against euro and yen

Concerns over Spain’s debt and the state of the world’s economy saw the euro, the yen and the Australian dollar fall against the US dollar in recent trading. A loss of appetite for risk has seen investors return to the greenback. Concerns over the state of the global economy have been fuelled by data coming out of the US that indicates poor earnings at large companies.

Spain’s troubles have not been helped after a credit rating downgrade for five of its regions by Moody’s. Although traders remain certain that the debt laden country will ask for financial aid there is still no firm indication of when exactly this will happen.

France has also released data that indicates manufacturing has hit a two-year low. The markets will be looking at PMI data for the eurozone and a business sentiment survey due to be published by Germany.

The dollar has settled at a two-week high of 79.923 and some analysts are predicting that the greenback will continue to be given support as the American economy outpaces others around the world. The Federal Reserve is currently meeting to discuss monetary policy. Although no major policy changes are expected, market activity could be improved by a positive statement.

A meeting by the Bank of Japan to discuss monetary policy is due to take place on 30 October. The yen is likely to remain subdued if the decision is taken to introduce a programme of easing.