Daily currency report

The sterling emerged as the winner, ending the day up against the dollar, the euro and the yen. Following the recent turmoil in credit markets, traders now appear to be cautiously returning to riskier investments and have consequently started to rebuild previous carry trade positions.

GBP
House price inflation in Britain picked up slightly more than expected on the month in August, although annual house price growth eased to a five-month low according to the Nationwide building society. These figures appear to point to a cooling of the housing market, although they are unlikely to settle the debate as to whether interest rates have peaked at 5.75 per cent.

USD
On the exchanges, the greenback lost ground against the sterling, but held steady against the other majors. With the Fed's annual symposium on its way, a more complete picture might better guide monetary policy and help Bernanke deliver more accurate cues to the public.

EUR
The single currency also benefited from the return to carry trade positions, posting gains against both the dollar and the yen. However, the euro is also vulnerable to bad news in the credit market, as the news that an Australian hedge fund had gone bankrupt caused the euro to drop sharply as investors grew nervous about taking on risk.

JPY
Japan's new Finance Minister, Fukushiro Nukaga, said that the spectre of deflation had not disappeared, urging the Central Bank to carefully watch world economic data to avoid mistakes. However, monetary policy still remains the remit of the BoJ, and analysts believe that a further rate hike will take place in the not-too-distant future.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/