Trimming losses against the euro and yen, the US dollar remains range bound following a better than expected, though still alarming, GDP number. The data showed that the U.S. economy contracted 3.8% in the fourth quarter, better than market expectations of a 5.5% decline. Coming on the heels of negative data earlier in the week, from jobless claims and durable goods orders, underscores the depth of the U.S. recession and heightened fears for global growth. Growing investor caution, rather than positive economic news, is fuelling USD gains.

Analysts still warn that the global economic outlook remains bleak and that the slightly more positive dollar sentiment seen this week could quickly turn.

The euro, already weakened after data showed Eurozone inflation receding and unemployment increasing, fell to a one-week low against the dollar after ratings firm Moody's Investors Service downgraded its outlook on Ireland's long-term debt to negative from stable.

The single currency was also hit after billionaire investor George Soros said the currency may not survive without a European Union plan to deal with toxic assets.

The negative inflation and unemployment data highlight the poor outlook for the Eurozone economy.

Better than expected UK mortgage data helped the British pound extend its recent gains against the USD and euro.

Though many investors remain aware of Britain's dire economic situation, it is believed that much of the bad news on the UK is already priced in to sterling and is turning attention to the euro, which many consider has room to fall further due to the deteriorating Eurozone economic situation.

The Japanese yen is stable, though overnight gains were erased following the release of today's US GDP data. Safe haven flows back to the USD are keeping the yen under pressure.

With lower oil prices coupled with bleak US economic data released today, the Canadian dollar has lost some ground against its US counterpart. Investors are shying away from riskier investments which have lowered the short-term prospects for the loonie.

The return to extreme risk aversion combined with yesterday's surprise 150 basis point cut has weakened the New Zealand dollar to 6-year lows against the USD. Adding fuel to the fire were comments by Reserve Bank of New Zealand Governor, Alan Bollard, who said there was room for more interest rate cuts. The kiwi has fallen about 13% this year as investors priced in more rate cuts and a possible credit rating downgrade.

The Australian dollar followed the NZD's downward spiral to 1-week after grim data reinforced expectations of a 100bp cut next week by the RBA. The Aussie lost 8% during January as risks of a mounting global recession keep investors wary of high-yielding currencies amid mounting risk aversion.

Indicative rates:

EUR/USD 1.2958

USD/JPY 89.18

GBP/USD 1.4353

USD/CAD 1.2220

USD/MXN 14.1610

USD/CHF 1.1518

AUD/USD 0.6526

NZD/USD 0.5144

USD/DKK 5.7507

USD/SEK 8.1700

USD/NOK 6.8550

USD/TWD 33.6900

USD/CNY 6.8402

10-Year Treasury Note Yield: 2.830

Dow Jones Industrial Average: 8,061 -88.01

This market summary is prepared by Union Bank of California's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.