Daily currency report

The pound dropped to a six-week low against a basket of currencies on concerns over the UK financial sector. The catalyst for the rapid decline of sterling was the announcement that the Lloyds banking group will place £260 billion of assets into a state insurance programme, giving the UK government a stake that may rise to 75 per cent. As a result of this the US dollar rallied across the board, aided by global recession fears and bank sector concerns.

Sterling

Sterling plummeted, hitting its lowest level in six weeks against the US dollar and a five-week low against the euro as the focus shifted back on UK banking problems. UK financial shares fell after the government increased its stake in Lloyds Banking Group. Subsequently, shares in Lloyds fell more than 10 per cent after it emerged that the government would increase their stake in the bank.

US Dollar

The US dollar strengthened across the board as global recession fears and banking sector concerns weighed on world stock markets, spurring safe-haven demand for the greenback. The main focus has not changed only that a few added comments weighed on sentiment sending equity markets to touch fresh 12-year lows in the US.

Euro

The euro strengthened slighted against sterling while declining against the dollar, on the back of poor UK data. European Central Bank executive board member Lorenzo Bini Smaghi issued a statement stating "they are prepared to cut interest rate to zero if deflation threatens and the economic situation worsens".

Japanese Yen

The yen fell across the board as doubts about its status as a safe port in the global economics gloom eroded its standing with overseas investors, who are concerned about Japan's own weak economic outlook. Japanese officials warned that tough action would be taken against falling share prices.