LONDON (AFP) - Growing warnings of an "inevitable" global recession and the expectation of more interest rate cuts triggered turmoil on the currency markets and sharp falls on stock exchanges Wednesday. The British pound fell to a five-year low against the dollar as Prime Minister Gordon Brown indicated Britain was "likely" entering a recession, while the euro and other high-yield currencies saw sharp falls. On the stock markets, Japan's Nikkei share index closed down 6.79pc after Wall Street's Dow Jones index sunk 2.50pc Tuesday while Europe's major markets were all down. In late morning trading, London was down 3.35pc, while Paris lost 3.44pc and Frankfurt fell 3.25pc near the half-way stage. In a speech late Tuesday, Britain's central bank governor Mervyn King said the financial crisis had squeezed the amount of money banks would lend to consumers and companies, at a time when high energy and food prices were also reducing disposable incomes. The prospect of a sharp economic slowdown raises the chances that the British central bank will again cut interest rates, making sterling a less attractive investment than the euro or the dollar. And an expectation of similar rate cuts in the 15-nation eurozone to spur economic growth forced the euro towards a near 2-year low against the dollar. There were also more signs of trouble in the emerging markets, with South Africa's rand falling to a six-year low against the dollar. After Hungary's forint currency fell to a near two-year low point against the euro, the central bank in Budapest moved to stop further plunges by hiking up its key interest rate by three points. "The escalation of the crisis has revealed or exacerbated existing vulnerabilities (in emerging markets) such as current account deficits that were ignored when times were good " ie., capital was plentiful," said the New York-based RGE think-tank in its latest newsletter. The turbulence on the stock and currency markets came despite new attempts by the US Federal Reserve to restore confidence to the fragile financial system. In a bid to help troubled money market mutual funds, the Fed said it would make available up to 540 billion dollars (420 billion euros) for purchases of highly rated short-term debt. The market for these assets, which in normal times are considered safe investments offering modest returns, has frozen up in recent weeks as the global financial crisis worsened. The US last month unveiled a 700 billion bailout package for its banks while European governments have also guaranteed inter-bank loans worth more than a billion dollars to stimulate lending.