LONDON, Jan 21: The euro slipped back after early gains on Wednesday.

Markets reacted cautiously to Obama’s inauguration speech, made on Tuesday, which did not provide fresh details on measures to spur the economy and stop further damage to the financial system, dealers said.

They said heavy falls in US bank shares earlier in the week as they reported more massive losses may have undercut the view that the US economy and finance sector must turn for the better at some point soon.

However on Wednesday, the banks saw a strong technical bounce and this may have helped the dollar, along with a return of safehaven buying as investors seek to protect their money in the worst global downturn for decades.

In late London trade, the euro was at 1.2865 dollars, down from 1.2876 dollars in late New York on Tuesday.

The dollar fell to 88.19 yen from 89.68 yen.

The pound slumped to 1.3693 dollars, its lowest level since June 2001, before recovering slightly to above 1.37 dollars.

“Signs that the financial crisis is deepening in the UK has shaken investor confidence in the currency,” noted NAB Capital strategist John Kyriakopoulos.

“The cost of financing this rescue package... has led to investors betting that the British government may lose its top AAA credit rating,” he added.

In late London trade, the euro changed hands at 1.2865 dollars against 1.2876 dollars late on Tuesday, at 113.34 yen (115.50), 0.9363 pounds (0.9298) and 1.4797 Swiss francs (1.4783).

The dollar stood at 88.19 yen (89.68) and 1.1481 Swiss francs (1.1479).

The pound was at 1.3781 dollars (1.3849).

On the London bullion market, the price of gold fell to 849.25 dollars an ounce from 853.25 dollars late on Tuesday.—AFP