The dollar heads into 2009 on the back foot, hit hard in recent weeks by the Federal Reserve’s decision to lower US interest rates to effectively zero.

But its December performance cannot disguise the fact that the US currency emerged from a seven year downtrend in 2008, despite the fact that the US economy has gone into recession amid plunging house prices, collapsing consumer confidence and rising unemployment. The dollar has fallen against the yen this year, but is set to end 2008 higher against sterling and the euro.