Sterling and the euro edged higher yesterday, recovering from earlier losses on a slight thaw in risk aversion.
But market concern persisted over losses in the UK banking sector and a deepening recession in the eurozone, firmly limiting the rebound by the pound and the euro.
Sterling and the euro were buoyed by short-covering as stocks in Asia came off earlier lows and as US stock futures rose.
Market participants, however, saw little reason to predict that the worst was over for the pound and the euro.
"These currencies did not have too many concrete reasons to rebound, perhaps apart from the fact that stocks in the region did not fall as steeply as anticipated after the tumble in US stocks the previous day," said Shuichi Kanehira, a senior trader at Mizuho Corporate Bank.
"The long-term trend still points towards major currencies being sold against the yen, with the trend only temporarily offset by occasional bounces in equities," Kanehira said.
Earlier yesterday, the pound hit a seven-year low against the greenback and a record low versus the yen. The euro retreated to a six-week trough against the dollar and hit a three-month low versus the yen. The British unit was at 124.65 yen, down 0.2 per cent after sinking to a record low 123.95 yen. The euro climbed 0.3 per cent to $1.2945 after earlier hitting a six-week low of $1.2845 on trading platform EBS.
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