The sterling lost ground against the other major currencies as government announced that the private sector had failed to come up with a satisfactory rescue package for Northern Rock, immediately sparking a sell-off of the pound. Elsewhere, the Australian dollar soared to a three-month high against the greenback after minutes from the last Reserve Bank of Australia's policy meeting showed that the Bank had given serious consideration to delivering a hefty 0.5 per cent rate hike at the start of the month.

GBP

The sterling slumped to a two-week low against the euro and was also sharply weaker against the dollar after the announcement that Northern Rock would be nationalised. Northern Rock borrowed around £25 billion from the Bank of England since end of last year, and the government's failure to find a suitable rescue package from the private sector has raised concerns that the UK taxpayer is set to pick up the bill.

USD

With US markets closed for the President's day holiday, the dollar's gains against the pound were more a consequence of sterling weakness rather than genuine support for the greenback. Even though US data is expected to remain weak, there is a growing sense that much of the bad news has already been priced in.

EUR

The euro was another currency to benefit from sterling weakness, hitting a two-week high versus the pound. However, in the absence of any significant data releases, trading in the euro was generally subdued, with investors cautious as they weigh up the likelihood of European Central Bank interest rate cuts in the months to come.

JPY

The yen traded within recent ranges, as investors continued to digest the Bank of Japan's decision to keep interest rates on hold at 0.5 per cent.