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The British pound appreciated in the forex market today, reaching a 2 and a half-month high against the U.S. dollar. Similar to a lot of other currencies, the pound mainly appreciated on news from other countries rather than domestic progress.

European leaders agreed on new fiscal terms, where countries with too much national debt will be punished. Although the proposition was presented over a month ago, European countries officially signed it last night in Brussels, Belgium. Furthermore, Greece announced that they are on the road to resolving their crisis and getting their balance sheet in order after much trouble negotiating with domestic banks.

The pound, also known as the sterling, appreciated 40 basis points against the U.S. dollar, reaching a total gain of 150 basis points for January 2012. The sterling also gained 40 basis points against the yen and 20 basis points against the euro.

The Canadian dollar weakened together with Canadian stocks in today’s trading session, as it was reported that the country’s consumer spending decreased during the last quarter of 2011. The Canadian currency has been riding a wave of appreciation lately, along with stock markets. However, The currency started to depreciate just as stocks did today.

The main reason behind the Canadian dollars fall in today’s market was that risk sentiment is fading back to the same level a couple of weeks ago. This made oil prices fall, which in turn hurts the Canadian economy as oil exports are a large source of income for the Canadians.

The U.S. dollar appreciated 0.4 percent against the Canadian dollar today, the Japanese yen even managed to gain 0.2 percent more than the U.S.

The U.S. dollar is basically trading at the same levels it did yesterday, which was a record low against the euro in about 6 weeks. The Japanese yen also managed to gain against the U.S. dollar, and continued to do so today by 20 basis points.

The forex market have witnessed a broad sale of U.S. dollars, mainly because other assets are doing very well at the moment as risk sentiment is high. Asian stock indices appreciated around 90 basis points and Europe’s main stock index gained 20 basis points today alone. Both these indices have been gaining for three days straight, just like currencies denoted as high risk, such as the euro. Generally, when risk sentiment is high, investors tend to buy mostly stocks, but also commodities. Bonds are the least favourite assets during good times, currencies in the forex market are a close second. If investors do buy currencies, it is most commonly exotic currencies of emerging markets.

The South African rand experienced a boost in the forex market today as several global events positively affected the South African economy. There were good signals coming out of Europe, demonstrating that a credit downgrade does not mean much as European countries managed to sell bonds far beyond their initial aim. China also presented their share of positive news, mainly that the country’s GDP increased more than analysts had estimated, showing that they are not contracting as much as many people had believed.

These news are basically interpreted as the possibility of a stronger global economy. As most countries are linked, positive effects in Europe and China will ultimately affect all other countries involved in global trade. South Africa in no exception, especially since a substantial part of the country’s income stems from raw material exports. A boost in the economy means overall higher demand, which naturally will have an affect on commodity prices. As the price of metals increase, the South African rand reaps the benefits by experiencing an increased demand in rand-held assets.

There are still rumors floating around that several European countries will receive lower credit ratings. Although these rumors have been constant for a couple of months, they have recently caused a downfall for the euro.

The euro depreciated against all major traded currencies in the forex market, the possible downgrades led to increased short bets by investors. The biggest falls were against the U.S. dollar and Japanese yen. Meanwhile, the U.S. dollar is breaking records as it hit the highest trading point in around 65 weeks.

The euro weakened 130 basis points against the U.S. dollar and a full percentage against the Japanese yen, which is the lowest point in over 11 years. As stock indices fell, the U.S. dollar managed to appreciate 30 basis points against the Japanese currency as well.

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The South African rand has had a good run the last couple of days, appreciating several basis points against the U.S. dollar on a daily basis. However, the hot streak came to an end today as the demand and price for commodities decreased.

The South African economy is dependent on its raw material exports, which took a hit as the price of metals decreased in the commodity market today. Metals and other natural resources account for over half of South Africa’s exports according to several sources. As the price of raw materials fell, demand for assets held in South African rands decreased as well. The main reason behind the price fall is still the threat of the European debt crisis and its possible effects on global growth.

The rand weakened 0.4 percent against the U.S. dollar and 0.3 percent against the euro.

The South Korean won is still taking losses in the forex market due to the European debt crisis. Analysts predict that the country will experience less economic growth and less export as European demand decreases.  Currently, estimates are that South Korea will export a third of what they did last year, which will cause major problems fort the country. South Korean officials have stated that 2012 probably will be a tough year and that the South Korean government will have to work hard to prevent taking more hits as a result of a crisis in Europe.

General market consensus is that demand for South Korean assets will decrease and that the South Korean won will continue to depreciate in the forex market. Investors are looking to invest in safe currencies such as the U.S. dollar and Japanese yen. The won dropped 0.3 percent against the U.S. dollar.

The Russian currency kept depreciating for a second consecutive day against the U.S. dollar today. The ruble fell over half a percentage against the U.S. dollar today alone, which made it come close to the weekly low point. The Russian currency weakened even more against the euro, totaling 0.7 percent depreciation.

There were two main reasons for the ruble’s dip today, falling oil prices and market intervention from the Russian Central Bank. Russia is dependent on raw material exports, mainly oil to the European region. As the European debt crisis remains a threat, the demand for oil decreases due to less economic activity. As a result, the demand for Russian rubles decreases as well.

The second factor behind the ruble’s fall is measures taken by Bank Rossii, mainly widening the spam the country’s currency is traded between. The Russian Central Bank weighs its currency against six other currencies including the U.S. dollar and euro. The bank decided to change the composition by weighing the basket against 6 rubles instead of 5 rubles.

European banks can now enjoy vast amounts of very cheap capital, as the European Central Bank initiates its three-year lending program with very low interest rates. Current expectations are that a lot of banks will take part in the action and that the total borrowed amount will mount to just under 400 billion U.S. dollars.

Analysts are saying that very few banks will resist applying for the loan, as the cost is low and basically considered to be free capital. Banks, traders and strategists have embraced this program, as the ability to lend money within the region has been very difficult due to a high level of skepticism across the board. What the European Central Bank is trying to do is to ease the markets and reinstate trust with adequate cash flows for both banks and consumers.

As a result of the program being implemented, the euro is on its second day of appreciation in the forex market, gaining 0.3 percent against the U.S. dollar today.

Earlier this year, credit agencies including Standard & Poor’s chose to downgrade the U.S. credit rating, stating that the country was too divided and that politicians could not agree on fiscal policies to adequately deal with a pressing recession.

It turns out that the agencies were wrong, as the U.S. congress recently came to an agreement and signed a bill worth 1 trillion U.S. dollars. Economists claim that the downgrade of the U.S. economy was inaccurate since the main purpose of the credit rating is to assess if an asset is risk free or not. Standard & Poor’s claimed that U.S. bonds are not, as they cut the country’s AAA rating. However, just because the economy witnessed lower growth and higher unemployment does not mean that purchasing U.S. issued bonds bears with it a level of risk.

The main criticism for the downgrading has been that U.S. treasuries are not risky assets as the U.S. government can print money and pay back lenders whenever they want to, regardless of the budget deficits it may cause.