Daily currency report

The sterling lost more than two per cent against a surging yen as investors ran for safety to the low-yielding yen, which shot up, sweeping the dollar to a one-year low while pummelling the sterling and other higher-yield currencies.

GBP
The sterling fell to its lowest level in nearly a year versus the yen and also slumped to a fresh two-month low versus the greenback as investors continued to reduce their carry trade positions. The stronger than expected retail sales did little to help the currency as traders remain focused on the fallout from problems in the American credit market.

USD
The Fed's $33 billion more than average injection of cash into the US banking system since 2001 appears to have failed to quell the credit-market crunch, increasing pressure on Chairman Bernard Bernanke to lower interest rates. However, the dollar had a particularly good week on the exchanges, posting strong gains against the euro and heading for its biggest weekly rise against the sterling in almost two years.

EUR
It was another bad day for the euro, ending down against both the dollar and the yen. Behind its decline was yet again the unwinding of carry trade positions. However, in view of the growing credit crisis in the US, and its impact on European banks, pressure is mounting on the ECB to keep interest rates on hold.

JPY
The yen surged again with fears of a global credit crunch driving the currency to a 14-month high against the dollar. By end session, the yen gained three per cent and five per cent against the AUD, and the NZD respectively.