Daily currency report

After a week of great volatility across the exchanges, the major currencies traded in relatively tight ranges. The US dollar and Japanese yen remain well-supported as investors continue to back safe assets, whilst the single currency and sterling appear to have fallen firmly out of favour. This is because it is becoming increasingly apparent that the steps taken by sovereign governments to address the current crisis may not be enough to prevent a recession or, even worse, a depression.

Sterling
The sterling slipped across the board as British Manufacturers' orders fell at their sharpest rate since July 1992 in January. The pound has weakened so much in recent months that it should have provided a boost for the UK's export sector as British products become relatively cheap to buy in foreign markets. However, the global economic slowdown has subdued consumer demand for all goods, heaping further pressure on British Industry.

US Dollar
The dollar was lent additional support by the fact that global crude prices fell by more than 2$ a barrel after official US figures showed a surprise rise in the country's oil and petrol stocks. However, the dollar is also facing difficulties and the recession in continuing to cool the labour market.

Euro
The euro lost earlier gains against the pound and reached a six week low against the dollar as orders for transport equipment in the eurozone almost halved in November from a year earlier. This triggered the biggest annual drop in industrial orders on record and pointing to an increasingly deepening recession.

Japanese Yen
The Bank of Japan announced that it would buy corporate bonds to ease a severe funding squeeze that is ultimately threatening to deepen a recession and forecasts that the world's second largest economy will slide back into deflation for two years.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/