Daily currency report

Sterling dipped to near one-month lows against the euro on concerns about the country's ailing public finances and fragile economic outlook. Following last week's spike in risk aversion, investor appetite could well remain the dominant force over coming days, with any further nervousness over the Dubai debt situation helping to keep the euro from making a convincing breakthrough. In other news, the Bank of Australia raised their interest rates proving they are the most aggressive economy at present.

Sterling

Sterling enjoyed a strong session against the US dollar but failed to make an impression against the other major currencies as investors remain wary over growth prospects in the UK. Nevertheless, sterling's good performance against the greenback has largely been attributed to broad-based dollar weakness, with rising commodity and equity prices underlining a renewed appetite for risk. Against the other majors, the pound continued to struggle most probably on the back of concern over the UK's potential exposure to Dubai defaulting on its huge debt repayments. Britain currently owns approximately 40 per cent of this debt.

US dollar

The US dollar opens at two-month lows against the euro and the main drive in the dollar's weakness comes as a result of improved risk appetite. For now the Dubai "credit crisis" appears to be contained allowing investors the opportunity to take on more risk. In doing so they have pushed gold prices higher as demand for the precious metal picks up.

Euro

In the eurozone the European Central Bank meets this week, with no policy changes anticipated, therefore the rate will remain at a flat one per cent. Markets, however, will be paying close attention to the post meeting press conference, which will outline details of the central bank's latest growth and inflation projections.

Japanese yen

The market was underwhelmed by the Bank of Japan's action of calling an emergency meeting on monetary policy. Nevertheless the Bank of Japan's decision to offer 10 trillion yen against a variety of collateral was nowhere close to the sort of direct quantitative easing measures that investors were bracing for.