Daily currency report

The sterling continued to build upon its 26-year-high against the dollar with the latter's selling was a recurrent theme last week in the wake of the news that sub-prime mortgage debt has reached $1 billion.

GBP
The sterling strengthened further after data revealed that the UK economy grew faster than expected in Q2, rising by 0.8 per cent in the three months to June and annual growth was three per cent. The BoE already raised the borrowing cost five times in less than a year and the inference is from this positive data that the trend should continue. Investors see rates going up to six per cent prior to the end 2007.

USD
The dollar fell to a record low against the euro as fears were enhanced that losses in sub-prime mortgage debt would toll on consumer spending and ultimately slow US growth. This accumulated debt has certainly soured dollar sentiment and provided the catalyst for a recurrent theme of dollar selling.

EUR
The plight of the US dollar is in stark contrast to the steady euro progress. The eurozone's economy is continuing to experience growth above trend and the upshot from this is that future interest rate rises may be imminent.

JPY
The yen rose to its highest position in more than six weeks against the dollar as a slide in key Asian stock markets provided the catalyst to use the yen as a carry trade to scale back investments in emerging-market assets. The fact that the BoJ's lending rate is 0.5 per cent and thus the lowest of the major economies, it has encouraged investors to enter the carry trades.

Commercial Foreign Exchange Travelex Malta, freephone: 800 77 33 22, www.travelex.com/mt/