Except for the krona, which got lucky on Thursday when Swedish inflation came in higher than expected at -0.1 per cent, the euro and the pound put in the best performance among the major currencies. At the back of the field the commodity-oriented rand and the antipodean dollars suffered along with the emerging market currencies as a result of heightened concerns about China.
On Tuesday the People's Bank of China (PBoC) took financial markets by surprise when it announced a new system for fixing the daily dollar/yuan exchange rate, in which market forces play more of a part than before. The effect of the change was to take the yuan about three per cent lower in just two days. Investors became nervous that the devaluation was driven by hidden weakness in the Chinese economy. They also worried that China might be embarking on a programme of competitive devaluation, even though the PBoC denied that this was the case. Every country with significant exports to China saw its currency take a hit.
The US dollar also suffered. China's initial devaluation came less than 24 hours after two senior Federal Reserve officials downplayed the likelihood of a rate increase next month. Investors suspect that the Fed will be in even less of a hurry to take rates higher if slowing growth in China puts the economies of its trading partners into deeper trouble.
The euro was helped along by continuing progress in the negotiations between Greece and its creditors. Athens has now ticked enough boxes to have secured the approval of the EC for a third bailout. However, support has still not been forthcoming from the IMF, which insists it will only take part if Greece receives significant debt relief, or from Germany, which refuses to countenance any write-down of Greece's obligations.
Top currencies for the week (percentage change against sterling)
SEK 1.7%
EUR 0.1%
GBP 0.0%
CHF -0.5%
CAD -0.8%
NOK -1.0%
JPY -1.1%
USD -1.1%
AUD -1.3%
NZD -1.8%
ZAR -2.6%
