The sterling hit a seven-and-the-half-year low against the dollar and also lost ground against the euro as concern continues to mount over the state of the British banking sector and the negative implications for the public finances. Such has been the spectacular pace of the pound's decline that some analysts have warned that parity with the greenback cannot be entirely ruled out. The US dollar was the main beneficiary of this concern as investors were attracted by the US dollar's safe-haven allure, preferring Treasury bonds to other, riskier assts. The Japanese yen was also firmer against the other majors, also under-pinned by safe-haven buying as investors sought low risk trades.

Sterling

Traders were quick to dump the pound, leaving sterling down by some 3.5 per cent against the dollar and also significantly lower versus the euro. The sell off came as markets digested the ramifications of the Royal Bank of Scotland's record breaking losses and the government's decision to take a 70 per cent stake in the bank.

US Dollar

The US dollar soared across the exchanges even though leading US indexes saw their biggest one-day fall in nearly two months. Banking shares bore the brunt of the sell-off, falling sharply amid concerns over the sector's outlook. The sell off came following a downgraded earnings report from the Bank of New York.

Euro

Concerns about the health of the eurozone economy remained rife after the European Commission forecast the economy would contract 1.9 per cent this year and Standard and Poor's downgraded Spain's credit rating. This over shadowed a bigger than expected improvement in the German ZEW economic sentiment survey.

Japanese Yen

The yen remains well supported across the exchanges with investors lacking any incentive to borrow in Japan and invest elsewhere.