Daily currency report

The sterling hit a four-month high against a basket of currencies, while the yen dropped to a record low against the euro. The high-yielding New Zealand dollar recovered all the losses it incurred on suspected CB intervention, striking a 22-year high against the dollar.

GBP

The sterling rose to key levels hitting a 15-year high versus the yen, extending gains made earlier in the week following the BoE minutes. The sterling hit a four-month high against most of the major currencies, finishing the week with its biggest one-week percentage gain versus the dollar since January, further supporting the potential for interest rates to hit six per cent by the end of this year.

USD

The dollar took traders on a rollercoaster ride last week, first with the negative impact from the housing sector followed by a positive impact from the Philadelphia Fed Index, to finally close the week near significant lows against the sterling and the euro.

EUR

The euro strengthened on the back of the dollar weakness and some extremely upbeat comments from the ECB President, who seemed to confirm that higher rates are to come. The Swiss franc also staged exceptionally strong movement with the government revising up its growth forecasts for this year and next and its 2008 inflation outlook.

JPY

The yen dropped to a record low against the euro, a 20-year low against the NZD and 15-year and four-year lows against the sterling and the dollar respectively, as carry trades continued. With Japanese interest rates likely to stay low, traders feel safe selling the yen because a weakening yen is supportive for Japan's economy, and policy makers aren't bothered about the currency's continued weakness.