Daily currency report

The US dollar fell against the euro amid increased risk aversion after Lehman Brothers Holdings Inc filed for bankruptcy protection, spurring a stock market sell-off, while the yen rallied on the unwinding of carry trades. The Federal Reserve policy makers are expected to stop short of lowering interest rates, but could signal readiness to cut them quickly if needed to protect the economy from one of the most serious financial crisis in decades.

Sterling (GBP)

The sterling has maintained its levels against the euro and is up slightly against the US dollar. During normal trading, the sterling would be looking at a busy week ahead in the economic calendar. However, with so much turmoil in the US markets, the releases this week may be over shadowed.

US Dollar (USD)

Markets will be looking forward to the Federal Reserve Interest rate announcement for any indication of further interest rate cut, however, it is widely expected the Central bank will keep interest rates on hold for now. The Fed held interbank interest rates steady at a low two per cent since April to help the economy recover from a deep housing market decline and sharp lending pullback.

Euro (EUR)

With other concerns facing traders it is hard to see how economic release from the eurozone will have an impact since markets will be concentrating on the US and following the continuing turmoil.

Japanese Yen (JPY)

Investors in Tokyo had their first chance to fully react to the Lehman debacle as Japanese markets were closed on Monday for a public holiday. They returned from the long weekend selling the dollar, pushing the US currency, which had already suffered a sharp decline against the yen, to a new two-month low versus the yen.