Daily currency report

The sterling buckled against the dollar and the euro as traders opted to take profit on last week's impressive gains. Also weighing on the pound was a return to risk aversion on the back of escalating worries that the global economy will be mired in the recession this year. Other high-yielding currencies like the Australian and New Zealand dollar also felt the heat as both the US dollar and the Japanese yen benefitted from these concerns. The greenback also rose against the euro, which continued to suffer from the view that the European Central Bank will cut interest rates this week.

Sterling

The sterling dropped against a basket of currencies, giving up a significant amount of last week's gains. The pound's slide was most pronounced against the dollar, which benefitted from a return to risk aversion by a majority of market players. Data released did little to ease the pressure on sterling as RICS confirmed that property prices were still in freefall during December.

US Dollar

The US dollar fell to a three-week low against the yen, as a grim view on the global economy and a generally weaker tone in equities worldwide prompted investors to shun riskier assets. However, the dollar rose to a one week high against the euro and advanced against the pound as the subsequent rise in aversion to riskier assets has rekindled demand for the relative safety of dollar denominated assets.

Euro

The euro touched a one-month low versus the dollar and yen as traders raised bets the European Central Bank will lower borrowing costs. The single currency also weakened as the International Monetary Fund said Europe is "underestimating" the need for fiscal stimulus.

Japanese Yen

Even though Japanese markets were closed for a public holiday, the yen advanced to a three-week high versus the greenback and gained against the Australian dollar.