The dollar fell for a second straight session after an unexpected drop in durable goods. This heightened worries about the health of the US economy and backed expectations of further rate cuts in. Elsewhere, the sterling headed towards record lows against the euro and fell against the dollar after the Bank of England policy makers claimed that the pound faced downside risks and reiterated a bias towards cutting interest rates while the euro got another boost after the headline German business sentiment IFO index rose to its strongest reading since August.

GBP

Bank of England policy makers said that the risks to sterling were on the downside, given the size of Britain's current account deficit. BoE Governor Mervyn King said that inflation was seen rising to around three per cent, but also added the bank was still predisposed to cut interest rates from the current 5.25 per cent.

USD

The dollar managed to trim losses against the yen following a slightly better-than-expected US new homes sales report for February, but this did little to ease concerns about the beleaguered sector. Data boosted the perceived chances the Federal Reserve would further ease its benchmark rate from the current 2.25 per cent at its next monetary policy meeting.

EUR

The euro rose half a cent against sterling, after an unexpected rise in German IFO business sentiment index. The strong reading poured cold water on any expectations for a near-term euros one interest rate cut. In addition, French business sentiment reached its highest level this year in March.

JPY

The Bank of Japan will act decisively if negative signs emerge for the economy, but there is no need to cut interest rates now, central bank policy member Miyako Suda claimed.

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