Daily currency report

The pound bounced back against a weaker dollar, as the greenback extended losses when key US payroll figures were released broadly in line with expectations. These figures were so bad that they helped to reduce the demand for the dollar as a refuge from global economic turmoil. The dollar later strengthened in a reversal of sentiment as investors once again seek safety.

Sterling

Over the weekend, Lloyds banking group announced it would take advantage of the UK government's insurance scheme. They will start meeting investors to garner support for its plan to insure £260 billion of risky assets with the British government, who will in return increase its stake in the bank to 77 per cent. The plan will limit losses banks could suffer if the economy continues to deteriorate and more loans sour.

US Dollar

The dollar trimmed losses against the yen but weakened further against the euro as data showed US employers cut jobs sharply last month, pushing the jobless rate to a 25-year high and underscoring the severity of a worsening recession.

Euro

Last week saw the euro fall to three-month lows against the US dollar, whilst the European Central Bank lowered interest rates to 1.50 per cent. It appears that the support seen at the end of last week is likely to wear of this week, as soft inflation figures and weak growth data are expected, from Germany and France.

Japanese Yen

The yen lost further ground against the dollar with data released showing Japanese current account balance swing to its largest deficit on record in January. The income surplus tumbled about a third from a year earlier, adding to pressure on an already falling yen.