Sterling slid back against the dollar after the one-off positive currency effects from the collapse of Prudential's attempt to buy AIG's Asian arm subsided and focus moved back to the pound's sensitivity to risk. Meanwhile, the yen slid to a two-week low against the dollar as the resignation of the Japanese Prime Minister, Yukio Hatoyama, raised concerns about the outlook for the currency, as his likely successor has previously claimed he wants a weaker yen. The euro came under further pressure as Iran's Central Bank announced through its state-owned media it would sell €45 billion from reserves to buy US dollars and gold.

Sterling

Sterling had a positive start as it continued to gain support from the news that Prudential, the UK's biggest insurer, was withdrawing from its $35.5 billion deal to buy AIG's Asian subsidiary. Still the pound's newfound appeal seemed short lived as sterling faltered against the dollar, even after the release of data showing mortgage approvals rose slightly more than expected in April.

US Dollar

The dollar rose broadly, posting solid gains against the yen on the back of political uncertainty in Japan.

Euro

The euro started on the back foot against the US dollar as persistent concerns about sovereign debt in the 16-nation zone continued to dull the single currency's appeal. The euro dipped to a near four-year low versus the dollar on concerns that Europe's efforts to cut budget deficits will hurt its economic revival. The euro dropped even further on speculation that Iran's central bank will sell €45 billion from its reserves to buy dollars and gold.

Japanese Yen

The Japanese currency continued to fall against most of its major counterparts on speculation outgoing Prime Minister Yukio Hatoyama will be succeeded by Finance Minister, Naoto Kan, who has called for the Bank of Japan to do more to fight deflation. This fuelled concerns that Japan's new leadership will pursue policies that may weaken the yen. The yen lost further ground as a strong rebound in stock markets lent support to higher-yielding currencies, even to the floundering euro.

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