Daily currency report

The pound fell against the yen and the dollar, in step with other high-yielding currencies, while the ECB injected an emergency €95 billion into the financial system in an attempt to restore calm to markets.

GBP
Risk aversion led investors to sell off the sterling and buy back the lower yielding currencies in which they had borrowed. By the end of the session, the pound was down against both the yen and dollar, although moderately up versus the euro.

USD
As interest rates have risen attempting to curb inflation, so has the number of people defaulting on the sub prime mortgage, causing a ripple effect through the banking system with US home lender, American Home mortgage, declaring bankruptcy. While all of this has greatly increased market volatility, the effect on the greenback itself has been benign. Investors became increasingly risk-averse, reversing short dollar positions, allowing the dollar to arrest its rapid decline and move up from its record lows against the euro, and the sterling.

EUR
The ECB spelled out why it stands ready to raise interest rates for a sixth time in September despite volatile market conditions, stating that monetary policy remained "accommodative", and price risks remained on the upside. However, with a September rate hike already priced in, the bulletin failed to lift the euro, which ended the day down across the board.

JPY
The yen rose broadly as turbulence in global equities and credit markets caused investors to shy away from risk and unwind carry trades. Recent volatility in financial markets had raised doubts among investors as to whether the BoJ will raise interest rates later this month.