Daily currency report

The sterling suffered a fresh blow to its confidence after Moody's Investors Service announced that it was downgrading its rating of Barclays' long-term credit, citing expectations of huge losses on credit-related write-downs. Meanwhile, a better than expected US manufacturing ISM for January helped lift spirits with the Bank of Japan's announcement that it would buy shares held by Japanese banks also improving risk appetite. In other news, the Reserves Bank of Australia cut interest rates by a full one per cent overnight, bringing them to 3.25 per cent and their lowest level since 1964.

Sterling

The sterling has come under renewed pressure this week falling three per cent versus the dollar from Friday, while also losing ground against the euro. This is despite the news that the headline index of the CIPS/PMI manufacturing survey rose modestly in January.

US Dollar

The US dollar enjoyed a positive session, rising to a new two-month high against the euro and gaining against the sterling as poor economic figures and renewed concern about the banking sector rekindled demand for safe haven assets. Nevertheless, the greenback gave up many of these gains as details of investment packages announced by both the Australian and Japanese authorities helped to persuade investors to take on a degree of risk.

Euro

The euro slid to a new two-month low against the resurgent dollar and a one-week low versus the Japanese yen. The single currency was undermined by January's PMI manufacturing survey, which remained within striking distance of December's record low.

Japanese Yen

The Bank of Japan said overnight it will start buying up to one trillion yen worth of shares held by financial institutions. It will buy the shares up until April 2010 and will only pick up shares above a certain rating.