The US dollar extended gains in choppy trade, climbing to a fresh one-year high versus a basket of currencies, fuelled by declining crude oil prices. Larger than expected third quarter losses recorded by the fourth-largest US investment bank Lehman Brothers were shrugged off by market players on the view that problems in the US financial sector would also hurt the global economy.

Sterling (GBP)

The sterling fell versus the dollar and the euro as results from troubled US bank Lehman Brothers showed larger than expected third quarter losses. The announcement increased risk aversion boosting the low-risk Japanese yen close to its highest level against the sterling in nearly four years and keeping the pound under broad selling pressure. Going forward, a weaker pound should help to correct Britain's hefty trade deficit by making exports more competitive and imports more expensive.

US Dollar (USD)

The greenback has held on to the bulk of its recent gains, despite nagging worries regarding the health of America's financial system in the wake of a year-long crisis in global credit markets. Moreover, the dollar's recent momentum and the view that its interest rate differentials should improve have largely overshadowed the news regarding Lehman Brothers.

Euro (EUR)

The single currency fell to an 11-month low versus a broadly rallying Japanese yen, in a fresh wave of risk aversion. Better than expected data from France did little to support the euro. Overall, investors continue to view the eurozone's economy as being vulnerable to further declines that should ultimately lead to lower borrowing rates.

Japanese Yen (JPY)

The Japanese yen has benefited from the rise in investors' aversion to riskier asset classes. The yen's low yield keeps it vulnerable to selling in favour of higher yielding, riskier assets during times of relative calm in financial markets.