Improved risk appetite and investor sentiment saw both the US dollar and Japanese yen come under sustained pressure, with the euro benefitting the most from the return to risk. Elsewhere, it proved to be a more difficult day for sterling, which failed to exploit this broad-based dollar weakness in spite of promising gains made during the previous session.

Sterling

Sterling traded within a relatively tight range against the other major currencies, following impressive gains made against the US dollar in the Asian session. Buoying the pound was a rise in global equity markets and the united front presented by the G20 finance ministers at last weekend's meeting.

US Dollar

The greenback slumped to a five-week low against the euro as improved risk appetite and rising share prices enticed traders away from their safe-haven dollar positions. The dollar has rallied over the course of recent months because investors see it as the safest store of value at a time when economies across the globe are contracting. The greenback's role as the main funding currency outside of Europe also enhances its appeal. However, the announcements by the Bank of America, Citigroup and JP Morgan that they were profitable during the first two months of the year has helped improve sentiment, prompting investors to feel somewhat more confident about buying stocks and other currencies.

Euro

The euro began the week in fine form, hitting an 11-week high against the Japanese yen as well as a five-week high versus the US dollar as a rise in regional share prices pointed to a recovery in risk appetite. Also boosting the single currency was a reported rise in inflation last month.

Japanese Yen

Just as with the US dollar, the Japanese yen, a traditional safe haven currency, fell broadly as a result of the improvement in risk appetite.