A decent set of jobs numbers out of America meant investors had little need for the dollar's safe-haven qualities, sending the US currency down against most of its major rivals.

Initial jobless claims fell 27,000 last week to 451,000 compared with estimates of a much smaller drop to 470,000. The Commerce Department upped the tempo with news that the US trade deficit narrowed 14% in July to $42.8bn.

That soothed fears the American economy is on the slide, whetting investor appetite for risk. The yen remained near yesterday's 15-year high.

Talk that European Central Bank executive board member Juergen Stark claims German banks need more capital had the euro on the ropes.

Sterling also struggled against the greenback following news that Britain's deficit on trade in goods jumped to a record £8.7bn in July from £7.5bn the month before. A surge in imports to their highest level in two years was blamed.

"The UK trade data for July were desperately disappointing, thereby adding to the mounting concerns over third quarter growth prospects," said Howard Archer, chief UK economist at IHS Global Insight.

The Bank of England's decision to keep interest rates on hold at 0.5% was no surprise, but many fear policymakers will employ further quantitative easing to bolster the economy.

Experts say any further fiscal tightening will be negative for the pound.

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