AFP - The British pound slumped on Tuesday against the dollar on news that Britain only just escaped recession in the final quarter of last year, dealers said. In late morning trading in London, sterling fell to 1.6127 dollars. Elsewhere, the euro declined to 1.4092 dollars and the US currency dipped to 89.53 yen. Britain narrowly exited a record recession in the fourth quarter of 2009 with weaker-than-expected growth of just 0.1 percent, official data showed Tuesday. The Office for National Statistics revealed that the economy grew during the three months to December, compared with the previous three months, after its longest ever recession lasting six quarters. However, the figure disappointed market watchers, who had expected a return to growth of 0.4 percent in the final three months of 2009. "The pound suffered from a sharp pull-back post-release and is likely to remain under pressure going forward," said Calyon economist Slavena Nazarova. The news means that Spain is the only major Western power still trapped in a deep recession following the aftermath of the global financial crisis and the subsequent worldwide downturn. The ONS added that the British economy shrank by 4.8 percent over the course of 2009, compared with the previous year -- the biggest annual contraction on record. Elsewhere, German business confidence rose for a record 10th month in a row, the Ifo index showed Tuesday, raising hopes that Germany's economy, Europe's largest, could lead the continent from its slump. The closely watched survey of around 7,000 firms in the key manufacturing, construction, wholesaling and retail sectors, climbed to 95.8 in January from 94.6 in the previous month, hitting its highest level since July 2008. "This positive reading from the German business survey will raise hopes that the recovery may be gathering renewed momentum in the first quarter of 2010," said Daiwa economist Colin Ellis. The result was better than analysts surveyed by Dow Jones Newswires had expected. The yen meanwhile won support on Tuesday as worries deepened that Chinese moves to curb lending could derail a still-fragile global economic recovery, dealers said. Investors dumped risky assets, including growth-sensitive currencies such as the euro, and headed for the relative safety of the yen in response to media reports saying that several banks in China had suspended new loans. The reports fanned concerns that Beijing may tighten its monetary policy soon as part of efforts to prevent its economy overheating. Eyes were also on the US Federal Reserve, which was to open a monetary policy meeting later in the day. Investors gave a muted reaction after the Bank of Japan kept its key interest rate unchanged at 0.1 percent. In London on Tuesday, the euro was changing hands at 1.4092 dollars against 1.4149 dollars late on Monday, at 126.16 yen (127.69), 0.8737 pounds (0.8709) and 1.4708 Swiss francs (1.4709). The dollar stood at 89.53 yen (90.22) and 1.0437 Swiss francs (1.0398). The pound was at 1.6127 dollars (1.6240). On the London Bullion Market, the price of gold eased to 1,091.05 dollars an ounce from 1,095.25 dollars an ounce late on Monday.

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