The US Dollar fell yesterday, losing some of the gains made earlier in the week as a short covering rally fizzled out and US treasury yields fell. Analysts consider dollar selling against the euro and other currencies by reserve managers was forcing the US currency down and that it would remain under selling pressure, especially if the Fed says it will continue to pump money into the market to improve liquidity.

The issue for the US dollar seems to be whether the market believes the Fed will deliver significant quantitative easing over a definitive time period.

In other news out of the US, the durable goods data showed an increase to 3.3% against expectations of 2%. Month on month new home sales also showed an increase in September at 6.6% against expectations of 4.2%.

The market reaction to these figures was muted as markets await the QE2 announcement in November.

Sterling strengthened against the euro and dollar on Thursday after stronger than expected Q3 GDP data cooled speculation of an extension of quantitative easing by the BoE in the near future.

The Pound got a further boost from talk that there is persistent buying interest on UK sovereign bonds from Middle East.