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Last updated: November 8, 2012 12:50 pm
Risk appetite in the currencies market remained suppressed in the wake of the US election, with the dollar and yen continuing to make gains against other currencies on haven demand.
The dollar hit a fresh two-month high after news of President Barack Obama’s re-election in the US, as concerns about the impending “fiscal cliff” dominated trading.
The yen made further gains against the dollar, with the US currency slipping 0.4 per cent to Y79.61.
Analysts said that the yen had emerged as investors’ preferred haven in the currency markets in the past two days amid uncertainty over the direction of the US economy, because of the Federal Reserve’s easing stance.
“Given that safe-haven demand for the US dollar is set to be countered by speculation that the Fed may be ready to pull the policy trigger again to offset the negative impact of the fiscal cliff on the US economy, we would expect the yen to remain the favoured safe haven play into year-end,” said Jane Foley, currency strategist at Rabobank.
News that the Greek parliament had passed austerity measures the previous night as a step towards securing another round of bailout funds failed to boost the euro.
Investors remained focused on deteriorating economic fundamentals for the wider eurozone and increasing concerns that Spain might not apply for a bailout and trigger the European Central Bank’s bond-buying scheme until 2013.
“Scepticism towards the euro remains a constant feature among market participants at present,” said analysts at Commerzbank.
The single currency hit a fresh two-month low of $1.2716 against the dollar and was later 0.3 per cent lower on the day at $1.2737 following the decision by the ECB to keep its main refinancing rate at 0.75 per cent.
The UK pound rose from its session lows against the dollar to trade flat at $1.5978 after the Bank of England left its main overnight rate at 0.5 per cent and held its asset purchases at £375bn.
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