The pound tumbled to fresh three-month lows versus the dollar after slipping below key psychological levels. Elsewhere, the yen made healthy gains against the euro, dollar and pound on bets widening credit-market losses and slowing economic growth will erode demand for higher-yielding assets funded by borrowing in Japan.

GBP
The sterling hit its weakest level against the dollar since August, ending the trading session down against 15 of the 16 major currencies, after a government report showed the current account deficit widened to a record £20 billion last quarter.

USD
The dollar rose to its strongest level against the euro since October and increased for a third day versus the pound on speculation rising inflation will discourage the Fed from cutting its target lending rate in 2008 after three reductions to 4.25 per cent this year. The dollar has advanced against nearly all of the 16 major currencies this month due unexpectedly strong US economic data.

EUR
The euro edged lower against the dollar reaching a new low for the month; however this was more a case of dollar strength than euro weakness, as there was little data in the way.

JPY
The yen strengthened versus all of the 16 most actively traded currencies except the CAD, as CB policy makers warned that global growth would weaken next year. However, it only briefly rose against the dollar, on the back of the news that China will raise interest rates for the sixth time this year to cool the economy after inflation accelerated at the quickest pace since 1996.