Daily currency report

Investor caution drove the US dollar higher across the board as global equity and commodity prices came under sustained selling pressure. Renewed concerns over the health of the global banking sector were behind the decline in market sentiment as the news broke that Japan's largest bank, the Mitsubishi UFJ, is seeking to raise $11 billion in capital through a rights issue. Also weighing on markets was the separate news that public sector net borrowing in the UK had hit £11.42 billion, or 59.2 per cent of GDP - the highest level since records began.

Sterling

The pound continued to lose ground after beginning to fall away during Wednesday's afternoon session. Monetary Policy Committee member, Paul Fisher, said the Bank of England is keeping all options open the scale of its quantitative easing programme. Official data did not help matters as the Office of National Statistics showed that retails sales rose less than expected at 0.4 per cent in October.

US Dollar

The US dollar benefitted from investor caution, rising against both the euro and the pound. The retreat from risk appetite was mirrored pretty much across the board with both equity and commodity prices slumping worldwide. Analysts have attributed this renewed caution to soft economic data released over the last seven days which has once again raised question marks over the strength and sustainability of the global economic recovery.

Euro

The single currency rose against sterling but lost ground against the US dollar as risk aversion once again weighed on financial markets. A worldwide decline in both commodity and share prices sparked the return to caution although Jean-Claude Trichet's statement that whilst the European Central Bank would proceed with a gradual withdrawal of the unconventional policies adopted to support the financial system, it was far too soon to put concrete exit strategies in place, also weighed on investors' minds.

Japanese Yen

The yen was one of the main winners alongside the US dollar as risk appetite came to halt and traders started to unwind carry trade positions.