Daily currency report

The US Federal Reserve cut rates by 0.5 per cent helping to ease pressure on the sterling after a difficult last few days. Also, with oil prices going up to a fresh record, over $80 a barrel, inflation is still at risk from energy prices. GBP

The sterling bounced back strongly against the dollar after the Fed cut interest rates by 0.5 per cent in the United States. The sterling had earlier hit a fresh one-year low on a trade weighted basis, continuing to be depressed by Northern Rock and not helped by an unexpected slight fall in the UK CPI rate. The CPI fell to 1.8 per ecnt in August, down from 1.9 per cent in July, its lowest level in more than a year.

USD
The dollar fell after the decision by the Fed to cut rates by 0.5 per cent to 4.75 per cent rather than the widely expected 0.25 per cent. The dollar also hit an all-time low against the euro. High yielding currencies, such as the AUD and the NZD have also fared well, pushing the dollar to a 15-month-low.

EUR
The euro hit a record high after the Fed's monetary policy decision. The monetary policies of the European Central Bank and the Fed are growing further and further apart, which provides the fundamental reason for the euro to continue the strengthen against the dollar.

JPY
The Bank of Japan kept interest rates unchanged as expected. The Japanese central bank has been looking to raise rates from the current low levels but that now seems unlikely to happen for several months in light of growing global economic risk and the uncertainty in financial markets.

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