The yen was the big winner as the new year dawned on the foreign exchange markets with fears over the health of the global economy fuelling demand for the low-yielding currency.

Worries over the prospects for global growth were sparked by a report on Wednesday that suggested the US manufacturing sector went into contraction in December. The skies were darkened further by the minutes from the Federal Reserve’s December meeting, which revealed heightened fears for growth in 2008, while soaring oil prices did little to lift the gloom.