USDCHF opened Europe at 0.7288 and fell to 0.7179 early in the session but the Swiss franc soon weakened after the Swiss National Bank said it expanded measures to counter the currency’s strength by increasing the supply of liquidity to the money market and expanding the banks’ sight deposits to 120 billion Swiss francs from 80 billion francs. It will also conduct foreign- exchange swap transactions to create liquidity.
Euro made some gains early in the session against the dollar after a successful Italian bond auction, which saw bond yields drop and helped ease concerns over the region’s debt crisis. EURUSD climbed from the open of 1.4333 to a session high of 1.4381 but soon fell after a French report showed industrial production fell more than economists estimated in June. French President Sarkozy met with the Bank of France governor to discuss concerns that France’s top-tier AAA credit rating could be downgraded if the euro zone sovereign debt crisis worsened.
Sterling dropped against dollar after the Bank of England quarterly inflation report saying the outlook for growth has weakened and the most likely scenario is that inflation will fall below its target in the medium term. GBPUSD fell to a session low of 1.6190 from the 1.6275 open price.
Then yen continued to gain strength, supported by this risk off environment in the markets. USDJPY edged down from the open of 76.87 to a low of 76.33, marking a fourth day of decline, accelerated after the U.S. Federal Reserve announced yesterday it will keep its fund rate at record low near zero and a quarter percent. Despite the Bank of Japan’s continuous verbal intervention, there has been no actual intervention in the markets to curb yen appreciation.