Daily currency report

The sterling looks to be on course to reverse the majority of the losses incurred earlier in the week following the European Central Bank's decision to cut interest rates. The pound has also benefitted from profit taking as investors seek to close out positions as they head for what will be a long weekend in the US.

Sterling

The sterling took full advantage of weakness in the euro to end the session higher against both the single currency and the US dollar. In the absence of any significant data at all regarding the British economy, economists have attributed the moves to weakness in the other majors as opposed to any underlying strength in the pound.

US Dollar

The decision by the European Central Bank to lower interest rates initially benefitted the US dollar, which rose across the board as investors were attracted by its safe-haven appeal. However, the greenback pared these earlier gains as traders opted to take profit as markets head toward the end of the week.

Euro

The ECB cut its benchmark interest rate to two per cent, its fourth successive reduction, but indicated it would pause for breath in February. The central bank reacted to the deepening eurozone recession to match its lowest ever rate and in line with what markets and most analysts had been expected before the meeting.

Japanese Yen

The yen rose to a new one-month high against the greenback and a six week high against the euro, despite news that Japan's machinery orders, a closely watched but volatile gauge of capital expenditure, fell by a record 16.2 per cent in November, double market forecasts.