Forex Battered sterling helps

Sterling dropped to its lowest level against the dollar in more than two years on Monday after the UK's finance minister issued a pessimistic view of the economy, helping the dollar to extend broader gains.
The dollar index crept towards an eight-month high, but broad falls on global stock markets capped gains, allowing the Japanese currency to rise on cooling demand for risky carry trades that involve selling the low-yielding yen, Markets also braced for the onslaught of a strong hurricane on the Gulf of Mexico, which has shut down activities at oil companies in the region and pushed oil prices more than a percent higher.
Sterling dropped to its lowest level against the dollar since late April 2006 and hit a record low against the euro on comments from UK Chancellor of the Exchequer Alistair Darling that the economy was facing its worst downturn in 60 years.
In the case of cable, the dollar was at extreme undervaluation levels ... so from a longer term view the pair could be in for more adjustment," said Ian Stannard, senior currency strategist at BNP Paribas. Given that U.S. markets are closed for a national holiday on Monday, market participants said that the UK currency could be in for more losses when New York traders return to work on Tuesday.Gains against the UK currency helped to push the dollar index .DXY up 0.3 percent to 77.428, approaching 77.619 touched last week for the first time since late December.