The euro fell to six-week lows against the dollar today and the pound hit a 23-year trough versus the US unit as weak data and global economic concerns kept investors extremely wary of risk.
The euro fell 1.5 per cent against the dollar to a six-week low of $1.2766, while the pound tumbled more than 2.5 per cent on the day to hit another 23-year low of $1.3502. At 1.05pm the euro was trading at 93.9 pence against sterling.
The UK and euro zone currencies fell to session lows after data showed the UK economy contracted by 1.5 per cent in the fourth quarter, far more than analysts had expected and confirming a recession.
Investors took little encouragement from earlier surveys showing the euro zone manufacturing and services sector contracted at a slightly slower pace in January, since they remain deep in recessionary territory.
The yen jumped on the back of its perceived safe-haven status, hitting record highs against the pound and nearing seven-year highs against the euro as financial sector woes pushed European shares down over 2 per cent to a six-year low.
"Equities have been drifting lower and risk aversion trades have pressured euro/dollar and cable (sterling/dollar) all morning, but now the weak data is also kicking in," Bank of Scotland Treasury Services currency strategist Naeem Wahid said.
"The (UK) GDP number is extremely weak at -1.5 per cent," he said.
This pushed the trade-weighted dollar index to a six-week high of 86.809. The dollar was also supported by comments from US Treasury Secretary nominee Timothy Geithner, who said a strong dollar is in the United States' interest.
His remarks came yesterday when he won the Senate Finance Committee's backing to head the US Treasury.
Reuters