The pound rose to its highest level in almost a week against the dollar after a report showed the pace of contraction in the UK construction industry slowed and investor concern eased that Dubai World may default. Meanwhile, the US dollar firmed against the yen after Japan's Prime Minister's comments continued to weigh heavily on the yen.

Sterling

Sterling rose against the dollar and euro, extending gains made the previous day as possible fallout from Dubai's debt-related problems eased. Currency markets showed little reaction to comments from the Bank of England chief economist Spencer Dale, who voted against increasing the central bank's asset buying programme last month.

US dollar

The US currency made gains against a broadly weak yen and also gained against the euro, as weakness in the stock markets rekindled demand for the greenback as a safe haven. However, risk assets got a boost in the late trading session after data showed US private sector employers shed fewer jobs in November from October, marking the eighth straight monthly decline in private-sector job losses.

Euro

The only data released in the eurozone was the PPI data which came in slightly above expectations at 0.2 per cent from October's last reading. This did boost the euro in the early morning session, but it was then capped by a turn in European equity markets.

Japanese yen

The yen fell against all of its major counterparts after the Prime Minister of Japan, Yukio Hatoyama, expressed concerns over the strength of the currency. This led the yen to drop back to its lowest in two weeks against the US dollar.

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