Daily currency report

Rumours of European central bank intervention lifted the euro and sterling towards the end of last week. The euro recovered from a four-year low against the dollar as worries over sovereign debt and a German ban on 'naked' short selling receded. Sterling also gained strength as the wave of risk appetite helped the pound off fourteen month lows against the US dollar as the latter had been the currency of choice over much of last week.

Sterling

Sterling recovered from a 14-month low seen against the dollar as investors unwound overstretched bets against the pound, a day after fears about more European financial regulation hit risky assets. Trading has been volatile on risk aversion, initially sparked by Germany's ban on "naked" short selling of some securities.

US dollar

The US dollar soared broadly, hitting four-year highs against the euro and a 14-month peak against sterling. Deepening concerns that Europe's debt crisis could overturn the global recovery accentuated the dollar's safe haven status. The dollar's safety appeal helped to put an end to any disappointing data on manufacturing and jobless claims that suggested the pace of the US recovery might be slowing.

Euro

The euro rose heading for its first gain versus the US dollar in six weeks. Investors bought back the single currency on news of central bank intervention, as European Central Bank President, Jean-Claude Trichet, said the euro was not in danger and it was a credible currency.

Japanese yen

The yen continues to see significant inflows on continued uncertainty surrounding the debt situation in Europe. However Bank of Japan Governor, Masaaki Shirawakawa, said that recent problems in Europe had not had a direct impact on Japan's economy when taking into account effective exchange rates.