The sterling rebounded from record lows against the euro after the Bank of England left interest rates unchanged at five per cent as markets expected, but the respite was to be short-lived. The European Central Bank also kept its main refinancing rate on hold at a seven-year high of 4.25 per cent to curb inflation which is running at the fastest pace in more than 16 years, even amid signs of a deepening economic slowdown. The euro subsequently fell to its lowest level against the dollar since January after eurozone finance ministers chairman Jean-Claude Juncker claimed that the single currency was still effectively 'overvalued'.

Sterling (GBP)
The pound gained against the euro, rebounding from a record low, after the Bank of England kept the interest rate unchanged. The UK bank's nine-member Monetary Policy Committee, held the benchmark rate as it seeks to balance the risk of a recession with the fastest inflation in more than a decade. However, the pound continued its decline versus the dollar as reports showed the economic slowdown is deepening.

US Dollar (USD)
The US dollar extended gains versus the euro after August's ISM services sector report surprised to the upside.

Euro (EUR)
The euro fell to fresh lows of the year versus the dollar, while it lost ground also against the sterling and the yen as the European Central Bank announced it would keep its interest rate on hold. President Jean-Claude Trichet claimed after the announcement that the countries that use the currency are in an "episode of weak activity".

Japanese Yen (JPY)
The yen rose against the dollar, the Brazilian real and the Danish krone on speculation the global economic slowdown led investors to reduce holdings of higher-yielding assets and pay back loans made in Japan.

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