Daily currency report

The US dollar managed to end the day up versus both the euro and the pound. With bad news hitting both the sterling and the euro.

Sterling (GBP)

The sterling suffered against the US dollar, but held steady versus the euro as the banking sector suffered another blow when the Bradford and Bingley was forced to announce a surprise loss for the first four months of the year, sparking a run on the bank's share price.

US Dollar (USD)

The greenback remained well supported in spite of the news that US manufacturing contracted for the fourth month in a row. Separate data also revealed that inflationary pressures surged to their highest in four years, strengthening fears the world's largest economy could be sliding towards "stagflation".

Euro (EUR)

As the European Central Bank celebrated its 10th birthday, the single currency failed to make any significant progress across the exchanges. With the central bank set to deliver another rate decision this week, the path ahead for the bank is less than clear. Inflation is currently running at 3.6 per cent, far above the Bank's stated target of two per cent, and in direct conflict with the bank's goal of price stability.

Japanese Yen (JPY)

The Japanese yen strengthened as the spectre of the credit crunch and consequent risk aversion once again spooked investors. Credit concerns provided the major scare as the banking sector was once again hit by more bad news. The yen stands to benefit the most from bad news because much of the investment in these institutions was originally funded by borrowing in the yen. With the allure of these investments rapidly dwindling, traders are forced to buy back the currency and push its price higher.