Sterling weakened to one-week lows against the dollar and euro and analysts expect further declines for the currency given the gloomy economic outlook for Britain and worries on the political front. Negative sterling sentiment helped the euro remain up on the pound, even after data showing German exports unexpectedly slumped in January, erasing December's jump and ending a four-month streak of gains. The yen declined against all of its major counterparts after a report showing that Chinese exports rose the most in three years renewed investor demand for riskier assets including stocks. In late trading the dollar held steady as figures released showed the US budget deficit had widened to a record low in February as the government boosted spending to help revive the economy.

Sterling

The sterling found itself under renewed pressure as a report showed UK manufacturing unexpectedly contracted. The drop in UK manufacturing output in January, even allowing for the weather distortion, was unexpected as forecasters had predicted a 0.3 per cent rise and the 0.4 per cent fall took investors by surprise.

US dollar

The dollar slipped against the euro, as risk appetite improved in general with a rise in European and US stocks, boosting demand for higher-yielding but riskier currencies. The US posted a record $220.91 billion budget deficit in February, Treasury Department data showed.

Euro

The euro fell against higher-yielding currencies after a report showed that German exports unexpectedly slumped in January, adding to evidence the European economic recovery is struggling to take hold. The German Federal Statistics Office announced sales abroad plunged 6.3 per cent from the previous month while economists had forecast a 0.5 per cent increase.

Japanese yen

The yen slipped on increasing expectations that the Bank of Japan will adopt further monetary policy easing measures. Concerns that the Bank of Japan may ease monetary policy as early as next week pushed the yen to lows against the dollar and the euro.