The Pound declines against the Euro and the yen as the UK is deemed a risk

The pound dropped to a record low versus the yen and the weakest level since 2002 against the dollar on concern the government will have to rescue more banks as the economy slips into a recession. Jim Rogers, chairman of Singapore-based Rogers Holdings, said the “U.K. is finished” and investors should sell the currency. Commonwealth Bank of Australia said there was a high risk of a cut to the country’s credit rating outlook and lowered its pound forecast. Prime Minister Gordon Brown authorized a 100 billion pound ($142 billion) bailout for banks. “I would urge you to sell any sterling you might have,” said Rogers. “It’s finished. I hate to say it, but I would not put any money in the U.K.” Rogers correctly predicted the start of the commodities rally in 1999. The GBP/USD is currently trading at $1.4040 as of 8:30am, GMT.

At a time when interest-rates are sinking toward zero around the world, the biggest currency traders are recommending countries that have the largest trade surpluses, led by Japan, Norway and Switzerland. BNP Paribas SA says the yen will strengthen about 14 percent against the dollar by June. Goldman Sachs Group Inc. made Norway’s krone one of its top 2009 picks, with possible gains of 17 percent versus the dollar. Bank of America Corp., the largest U.S. lender by assets, says the Swiss franc will advance against every major currency. “The tide has turned,” said Jens Nordvig, a senior currency strategist in New York at Goldman Sachs. “Surplus currencies such as the franc and the yen are likely to perform well, while the deficit countries are pretty vulnerable.” The USD/JPY is currently trading at 90.70 as of 8:45am, GMT.

German investor confidence probably improved for a third month in January after the European Central Banks cut interest rates and the government announced a second spending package to battle the deepening recession, a survey of economists shows. The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to minus 43.1 from minus 45.2 in December, according to traders and economists. The ECB last week cut its benchmark lending rate by half a percentage point to 2 percent, the fourth reduction since early October, while Chancellor Angela Merkel’s coalition agreed to spend an extra 50 billion euros ($66 billion) to stem Germany’s worst recession since World War II. The EUR/USD is currently trading at $1.2980 as of 9:00am, GMT.

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