The pound fell against most currencies as markets digested negative comments made by the latest member of the Bank of England, Martin Weale. The single currency remained on the back seat as doubts about the global economic recovery continued driving markets and investors favoured low risk currencies such as the Japanese yen and the Swiss franc. The dollar continued to fall versus the yen as poor US data added further concerns about the dire state of the US economy. Nevertheless, the weak data did somewhat benefit the dollar as risk aversion returned to the markets.

Sterling

Sterling plunged to a one-month low versus the dollar after dovish comments made by the Bank of England’s newest policymaker, Martin Weale. In an interview with The Times newspaper he suggested Britain faces the risk of sliding back into recession and that previous growth forecasts announced by the central bank for 2010 and 2011 were too optimistic. The pound recouped some of its losses after weaker than expected US existing home sales figures. However the bounce was short-lived as traders said a fall in stocks implied a decline in investor appetite for risk.

US dollar

The dollar continued to decline versus the Japanese yen and also lost ground against the euro. A report showed sales of existing homes in the US plunged 27.2 per cent in July to its lowest reading in more than 10 years.

Euro

The euro sank to a nine-year low against the yen and to record lows versus the Swiss franc. A sharp fall in eurozone shares as well as continued concerns regarding the global economic recovery saw the single currency come under pressure.

Japanese yen

The yen hit a fresh 15-year high against the dollar amid continued uncertainty about whether the government will intervene in currency markets. Speaking at an emergency press conference Japanese Finance Minister, Yoshihiko Noda declined to comment on any potential interference. However, he made it known that he was monitoring the situation “extremely closely, with grave concern”. The strength of the yen is a major worry as it puts a strain on exporters.

Commercial Foreign Exchange Travelex Malta, free phone: 800 733 22, www.travelex.com/mt/

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