Daily currency report

Financial markets were in turmoil yet again as billions of pounds were wiped off the value of shares worldwide. Currency markets reflected the turmoil, and the sterling dropped by some five per cent against the yen and also lost ground versus the US dollar. Losses against the euro were limited however, as European markets came under sustained pressure following the German bailout of the Hypo bank and the fact that Iceland stands on the brink of national bankruptcy. Elsewhere, Australia's central bank stunned markets by slashing interest rates by 100 basis points to six per cent.

Sterling (GBP)

The sterling hit another two-and-a-half-year low against the US dollar as investors continued to pull out of the pound as the crisis in the European financial sector continues to deepen. The pound also slumped by more than five per cent against the Japanese yen as the unwinding of carry trades accelerated. Pressure is now building on the Bank of England to slash interest rates by at least half a per cent.

US Dollar (USD)

The greenback posted fresh gains against both the sterling and the euro as traders favoured the known risks associated with the dollar over the growing uncertainty over prospects for the UK and Europe. Against the yen, however, it was a different matter as the Japanese currency forged ahead, driven by heightened risk aversion and subsequent unwinding of carry trades.

Euro (EUR)

The euro remains under intense selling pressure in the wake of successive bank rescues and lack of a coordinated action by governments. German mortgage lender Hypo Real Estate and Italian banking giant, Unicredit, were the latest in a growing list of European banks to either be seized by the government or to seek emergency financing in order to avoid failure.

Japanese Yen (JPY)

The yen soared across the board as investors continued to shun all but the safest asset classes in a broad-based flight to safety.