Daily currency report

The sterling lost further ground to the euro while the single currency itself weakened against the dollar.

Sterling

The pound remained under pressure against the dollar on concerns that the UK economic slump is deepening, sapping demand for riskier assets such as stocks. The British currency also dropped against the yen. Bank of England officials talked about potentially implementing quantitative easing, where central banks flood the banking system with money as well as keeping official rates low which have fallen to a record low of just one per cent.

US dollar

The dollar made further gains versus the pound and the euro as persistent weakness in global equity markets combined with concerns over the effectiveness of the US government's policies helped boost the greenback's safe haven appeal. Weekly jobless claims came in lower than expected at 623,000, although, given that the number is still huge, any optimism that this generated was only short-lived.

Euro

The euro fell against the greenback and the Japanese yen with signs that the 16-member bloc's economy continues to slow at an alarming pace and increasing expectations for additional policy easing undermined demand. Data released showed a record 2.6 per cent drop in industrial production in December. On an annualised basis, industrial production in the eurozone fell by a massive 12 per cent. The figures were far worse than market expectations.

Japanese Yen

The yen has shed many of its gains as stock markets in Asia rebounded on rumours that the US government is set to subsidise mortgage payments. Traditionally the yen tends to fluctuate in line with perceived shifts in investors' appetite for risk. Given the uncertainty dominating markets, the overwhelming trend across the exchanges has been to buy the yen at the expense of riskier positions.