dollar

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 against the dollar after the Fed confessed the US economy may not recover for five or six years.

Investec Asset Management, which runs $5.3bn in active currency funds, has warned the dollar could face a sharp correction this year due to reluctance in the US to embrace fiscal tightening.

Premier's Mike Jennings has removed the requirement for his Global DSR fund to have at least 50% sterling exposure due to its negative impact on performance.

Last week China's central bank announced it would introduce flexibility in the exchange rate of the renminbi, removing its peg to the dollar and allowing the currency to appreciate.

THE BIG QUESTION

Investec's Alastair Mundy has warned investors not to be reliant on dollar or sterling ‘safe havens' as the US and UK economies face a tough time reining in their burgeoning deficits.

Next year should be better. Not a particularly positive opening gambit, but unsurprising in view of current volatility.

The fear of contagion spreading from Europe is likely to keep the Fed funds rate low for longer and the rhetoric used by the Fed is unlikely to change as rates are kept low for ‘an extended period'.

Henderson chief economist Simon Ward believes the yen, rather than the US dollar, could be the big winner from a loss of confidence in the euro.

Miton manager Martin Gray shares his thoughts on the currency markets and why UK interest rate rises are more likely to come in years, not months.