The euro fell today, to a 3 week low against the sterling and dollar, as investors expect that euro zone inflation figures will come below the 2% target set out by the European Central Bank. Data to be released later today is likely to show that the euro zone inflation rate falling to around 1.8% in December, down from 2.1% in November.

If the latest inflation figures come in below 2% as widely expected, it is likely that the ECB will have to cut interest rate again. The euro still holds an advantage over the likes of the dollar and yen, with euro zone interest rates at 2.5% compared to the almost zero of both Japan and the US.

On Tuesday, the Federal Reserve made an unprecedented move and cut interest rates from 1% to between zero and 0.25% as it tries to fight the country’s recession. In a statement, the Federal Reserve said that "the outlook for economic activity has weakened further". It also predicted that the rates would stay at low levels for the foreseeable future.

Most analysts are calling the new interest rate virtually zero, with the Bank of America’s European economist Holger Schmieding saying, "Whether it's zero or 0.25% actually does not make a huge difference".

The dollar fell to an 8-week low against the euro and numerous other currencies today, as investors stayed clear of the greenback because of uncertainly of the struggling US car manufacturers and its economic impact.

Late last week, the White House said it was considering a $700 billion bailout to prevent the collapse of the US car manufacturers; this was after the US Senate had rejected the plans on Thursday.

In the early session, the dollar was 0.7% down against the euro at $1.3470, as investors are wary that the collapse of any one of the US car manufacturers could drag other companies under with it.

The euro and pound were down against the US dollar and yen on Tuesday, as investors are still unsure of which way the markets are turning. Disappointing UK economic data put the pound under pressure in early trading, as analysts another Bank of England interest rate cut.

Risk demand was low as other economic figures showed the Japans economy shrank 0.5% in Q3 of 2008, far more than the anticipated 0.1% fall. Japanese entertainment firm Sony, also announced it would be cutting 5% of its jobs as part of their restructuring process.

The dollar was down against the euro yesterday, as the European Central bank made a bigger than expected interest rate cut. The ECB cut rates by 75 basis points to 2.5%, which was 25 basis points more than analysts were predicting, pushing the euro up and the dollar down.

The Bank of England also lowered its rate by 100 basis points, its lowest level since 1951 to 2% as it looks to prevent a long lasting recession.

Investors were reluctant to take on the dollar, as key US employment data is due later today, which is expected to show a loss of around 340,000 jobs in November.

The yen was boosted to a 5 week high against the dollar, as investors continued to be wary of the global economic slowdown. The news comes as the Reserve Bank of Australia unexpectedly cut its interest rates by 1% to 4.25%; meaning that a total of 3% has been cut in the last four months.

The dollar fell 0.4% in early trading against the yen, bringing a 5 week high of 92.64 yen. The euro also fell against the yen, ending at 117.25 yen. The euro didn’t fair too well against the dollar either, falling 0.4%, whilst sterling took a 0.6% hit against the greenback.

The Indian central bank has closed its financial markets today (Thursday), as further attacks ravage Mumbai, the capital of India’s business sector. Although the markets will be closed, the Indian central bank has stated that it will still be making cash available for the interbank lending markets.

The Asian Chief Economist for private bank Credit Suisse said "Clearly, it will be negative for the sentiment towards India at this point of time, the time when the world is already looking to be highly uncertain in terms of its growth prospects," after the Mumbai attacks.

The dollar fell even more on Friday, with the yen dropping from previous highs as global stocks steadily recovered reducing the demand for the US and Japanese currencies.

The dollar continued its slide as growing concerns over the US auto industry and data showing that US weekly jobs claims soared did little to boost confidence with investors.

With the fears of a global financial crisis and with many economies technically already in a recession, the Swiss National Bank surprised the market as it cut 1 percent off its interest rates, taking it to just 0.5%.

The yen saw a large rise on Wednesday, boosted by the growing concern of the US auto industry and as uncertainties in the global economy continue on the stock markets. The US auto firms including Ford, General Motors and Chrysler have warned US congress that the industry is in trouble, and are seeking billions of dollars from the government to help.

The yen was up 0.3 percent against the dollar and 0.5 percent up against the euro, as investors predicted further rate cuts in the UK and US. Both the Federal Reserve and the Bank of England are expected to release detail of their policy meetings later today, which will give some indication on how far and how quickly the rate might be cut again.

After rallying earlier in the week, the euro fell against both the dollar and yen as key European data showed that the euro zone was technically in a recession.

The figures showed that France had managed a small growth between July and September, but other key figures also showed that the euro zone was in a technical recession after German growth contracted for the second successive quarter.