Daily currency report

After a very volatile week's trading sterling extended falls on Friday, hitting a 10-day low against a heavily supported US dollar, with traders citing heavy buying of euro sterling by a UK bank. Meanwhile, the greenback edged lower while the yen gained as investors pared back riskier trades as global stocks fell after US President Barack Obama announced plans to limit risky trading by US banks. Elsewhere concerns over Greece's finances weighed yet again on the euro.

Sterling

Sterling hit a session low against the euro and UK gilts rallied after weak UK retails sales data indicated consumer demand remains sluggish, scaling back recent optimism about the British economy.

US Dollar

The dollar's safe haven status was affirmed towards the end of last week after President Obama announced new plans to regulate banking limiting risky trading by US banks. The greenback consequently rose against all the other majors as the plan posed a downside risk for US bank profits and the economy, boosting the currency's safe haven appeal.

Euro

Greece and Portugal will remain in the spotlight and their story will continue to cap any euro gains. Concerns over Greece's finances continued to weigh on the single currency. The yield spread of Greek government bonds over the benchmark German bunds widened. Portugese, Spanish and other peripheral eurozone government bond spreads over bonds have also widened in recent days. It is one thing for the euro to be sold on Greece's woes. It is quite another for Greece's problems to cross borders and potentially undermine the integrity of the whole euro project. European leaders might argue that this needs to be nipped in the bud with an appropriate rescue package for Athens. European officials though have on numerous occasions ruled out a bailout for Greece.

Japanese Yen

The Japanese yen has come under heavy selling pressure overnight in the face of this week's two day Bank of Japan policy meeting. The central bank is expected to leave policy unchanged but there is some speculation that new policy measures or initiatives to stimulate the economy could be made, further weighing on the yen.