Daily currency report

The pound fell to a one week low against the dollar and a two week low against the Euro as dovish comments made by Bank of England governor signalled that there may be further injections of quantitative easing. Elsewhere, there was little to report with North America and parts of Europe closed for a market holiday.

Sterling

Sterling fell sharply against the euro and retreated further from three-month highs against the dollar. The pound took a tumble after the Bank of England Governor, Mervyn King, said the bank was still flexible to the notion of pumping more money into the economy and emphasised the benefits of a weaker pound. The market interpreted this as the bank was determined to talk down the pound and, as a result, sterling lost most of the gains it had made earlier in the week.

US Dollar

The dollar rallied from as much as 15-month lows against the major currencies in a technical rebound, triggered by selling pressure failing to push the dollar through key levels. It was certainly a day of mixed fortunes for the greenback as it started under pressure from pessimistic views shared by Federal Reserve officials. However, in the absence of any major US data, the dollar was supported by the Bank of England Governor, Mervyn King, announcing that a weaker pound would help UK exporters and would ultimately enable the pound to recover from the recession.

Euro

The euro appeared to be running out of steam against the dollar in the build up to several economic releases, which could give it some more direction. However, the single currency was yet another benefactor from the UK data released, as it moved back to a two week high against the pound following the release of the Bank of England's quarterly inflation report.

Japanese Yen

Japan's Nikkei stock average edged up 0.5 per cent, buoyed by gains on Wall Street on the view that the global economic recovery is looking much more certain.