Daily currency report

Interbank market rates soared as financial institutions looked for funds ahead of quarter end. Injections of liquidity by central banks provided some support but conditions still remain difficult. Meanwhile, oil rose more that $4 per barrel back over $100 on expectations that Congress will reach some kind of agreement soon.

Sterling (GBP)

Britain's current account deficit doubled and the economy stood still in the second quarter of 2008. The nationalisation of two banks this year is compounding pressure on the public. The Bank of England has left interest rates on hold at 5 per cent since April but expectations are rising that the central bank will cut them as confidence in the economy crumbles.

US Dollar (USD)

There has been optimism that the US administration will sort out a rescue plan and the dollar gained against several currencies, including safe havens like the Japanese yen and the Swiss franc. In other news, US single family homes plunged a record 16.3 per cent in July from a year earlier, extending declines that have plagued the housing market for over two years.

Euro (EUR)

The eurozone saw the collapse of a second bank in less than a week as Dexia became the latest European bank to be bailed out. The eurozone saw inflation fall to 3.6 per cent in September as expected but still remains at almost double the European Central Bank's target, making an interest rate cut in the near future unlikely.

Japanese Yen (JPY)

Japanese business sentiment has turned pessimistic for the first time in five years, the Bank of Japan's Tankan Corporate survey showed. The economy in Japan is facing a recession in the face of global market turmoil.