Sterling and Euro Llifted by Joint Rate Cut

Sterling and the euro reversed earlier losses on Wednesday while the Japanese yen pared its gains against the dollar, as currency markets responded to the news of co-ordinated interest rate cuts by central banks across the globe.

The British pound added 0.4 per cent against the US dollar to $1.7586, and the euro climbed 0.8 per cent to $1.3733, after the Bank of England, the US Federal Reserve, the European Central Bank and the central banks of Canada, Sweden and Switzerland reduced the cost of borrowing within their economies by 50 basis points, in a dramatic move to stimulate the troubled markets.

Amid the growing risk aversion, the pound had also tumbled to a seven year low against the yen, down 3.1 per cent at Y172.48, while the low-yielding Japanese currency surged across the board as investors sought a safe haven. The yen leapt 11.3 per cent against the Australian dollar to Y64.55, and was up 9.2 per cent versus the Kiwi at Y58.16.

The greenback pared its losses against the yen, down 0.9 per cent at Y100.77, having earlier sunk to an intraday low of Y98.58. The euro was down just 0.2 per cent against the yen at Y138.30, recovering from an earlier low of Y134.2, while sterling ticked down 1.1 per cent to Y176.08, having at one point plunged to Y171.94.

Canada's currency advanced, snapping a four-day losing streak, as global central banks cut interest rates by a half-percentage point. The Canadian dollar climbed as much as 0.3 percent to C$1.1020 per U.S. dollar, from C$1.1058 yesterday. It last traded at C$1.1033 at 8 a.m. in Toronto. One Canadian dollar buys 90.63 U.S. cents.

The Australian and New Zealand dollars slumped to their lowest level in more than five years against the greenback as investors sold higher-yielding assets on concern frozen credit markets will stall the global economy.

The Australian dollar fell as much as 9.8 percent to 64.51 U.S. cents, the weakest level since 2003, before trading at 66.99 cents as of 12:02 p.m. in London, from 71.50 cents in late Asian trading yesterday. It rebounded following a half percentage point rate cut by the European Central Bank, the Federal Reserve and other central banks. The so-called Aussie slid 9.6 percent to 65.88 yen, after touching 63.75, the lowest since 2002.

The New Zealand's dollar dropped as much as 7.95 percent to 57.92 U.S. cents, the weakest since 2003, before trading at 60.25. It slid 6.9 percent to 59.70 yen.

The India's rupee fell as much as 1.9 percent to 48.77 today in Mumbai on speculation a rout in global equities will encourage investors to take more money out of the nation., Financial Times, Bloomberg
10/8/2008 6:03:19 AM