The dollar fell to its lowest level in seven weeks against the euro and yen on fears that weak US corporate earnings will push the economy closer to a full-blown recession. The assumption is that the Fed will look to stimulate the economy through further interest rate cuts, prompting investors to dump the greenback.

GBP

The sterling fell to an all time low against the euro; sliding for a fourth consecutive day as investors continued to bet that the BoE will cut interest rates in February. Elsewhere, sterling also lost ground against the yen while edged up slightly against the dollar although analysts pointed out that this was due to dollar weakness not to sterling's strength.

USD

The greenback remains under pressure following Ben Bernanke's comments that the CB stood ready to take substantive additional action to maintain growth. This helped to cement expectations of another interest rate cut with investors looking for a 0.5 per cent cut to 3.75 per cent. However, some traders are still sceptical about chances of a rate cut, saying funding conditions for banks in US and European markets have recovered since December, and may not require such action.

EUR

French inflation accelerated unexpectedly in December as consumers paid more for food and energy, according to data that highlighted the dilemma facing the ECB. Consumer prices in France rose 0.4 per cent from November and climbed 2.8 per cent from a year earlier. Economists had expected the annual inflation rate would remain unchanged from November's 2.6 per cent.

JPY

With Tokyo Financial Markets closed for a National Holiday, the yen continued to rise against major currencies.