FOREX news -Pound plunges to 7-yr low vs dlr; euro falls sharply

Latest forex news The pound plunged to a seven-year low against the dollar on Tuesday on banking sector woes, while the euro dropped to a six-week low against the U.S. currency, weighed by worries about the state of the euro zone economy.

The pound tumbled after UK bank RBS announced the biggest loss in British corporate history on Monday and the UK announced a second series of measures to bail out the banking sector.

Fears about the outlook for the euro zone economy also weighed on the euro, pushing it to a six-week low against the dollar below $1.30 after the European Commission issued a grim 2009 forecast and Standard and Poor's cut Spain's debt ratings

Fears about the outlook for the euro zone economy also weighed on the euro, pushing it to a six-week low against the dollar below $1.30 after the European Commission issued a grim 2009 forecast and Standard and Poor's cut Spain's debt ratings.

European shares .FTEU3 edged lower, helping the yen gain sharply as investors remained wary of taking on risk.

Focus on Tuesday will centre on Barack Obama's inauguration as U.S. president, amid hopes that he will implement swift action that will help the U.S. economy, which has helped to bolster dollar sentiment.

Along with massive falls in the pound and the euro, this has helped pushed the dollar to a six-week high against a basket of currencies.

"The Obama euphoria is dollar positive, and the biggest casualty of this is sterling because by contrast sterling sentiment is really bad," Commerzbank currency strategist Antje Praefcke said.

At 0830 GMT, sterling was 2.7 percent down against the dollar at $1.4076, just above an earlier trough of $1.4057, its weakest level since early 2002, while the euro fell 1.2 percent to $1.2950, having hit a six-week low of $1.2923 .

The trade-weighted dollar index .DXY was up 0.9 percent, hitting a six-week high of 85.993.

The yen also rose, with the dollar down 0.1 percent at 90.57 yen and the euro down 1.4 percent at 117.20 yen.