Sterling fell as concerns about European banks dented demand for riskier currencies while the Bank of England policymakers offered little insight into the outlook for the UK monetary policy. Traders sold the pound, which is considered a high-risk currency, after reports German regional bank WestLB was struggling to secure funding thus highlighting the weakness of the global baking sector. The big winner was the yen, which rose to six-week highs against the dollar, while the greenback firmed versus the euro after economic growth and consumer confidence data suggested a US recovery could be slower and less robust than previously thought. The reports rekindled the safe-haven allure of both the dollar and yen, reducing investor appetite for riskier assets like stocks and commodities.

Sterling

The pound fell against the euro on speculation that the UK central bank will extend its asset purchase programme. Bank of England Governor, Mervyn King, claimed the UK economy still faces "profound challenges" when he faced the Treasury Select Committee.

US dollar

The dollar slipped briefly in choppy trading after a report showed US consumer confidence rose in November. However, GDP figures released during the session showed the US economy grew more slowly than initially thought in the third quarter, held back by strong imports and weak investment in non-residential structures, hinting at a lacklustre recovery.

Euro

The euro reversed previous losses against the dollar as a firmer than expected German sentiment survey offset concerns about the country's banking sector. The euro was helped by a bigger-than-expected rise in the German IFO November business climate index to 93.9, a level not seen since the collapse of Lehman Brothers last year, lifting optimism that Germany's recovery can gain momentum.

Japanese yen

The yen made impressive gains, benefiting from its safe-haven appeal as US data dampened expectations of a quick global economic recovery. Meanwhile, Japan's exports grew in October thanks to robust shipments to Asia, suggesting that a strong recovery in the region will support the country's export-driven economy for the rest of this year.

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