Economy
Sterling suffers month low against dollar |
|
|
| Economy | |
| Written by Catherine Murray | |
| Tuesday, 24 August 2010 | |
|
Sterling dropped to a one month low against the dollar on Tuesday, affected by comments from the Bank of England. Sterling dropped to a one month low against the dollar on Tuesday, stung by comments from Bank of England policymaker Martin Weale that Britain faces the risk of sliding into recession, Reuters reports. Traders said a fall in European share prices, implying a decline in investor appetite for risk, was adding selling pressure on the pound as it is considered a higher-risk currency. Britain faces a "significant" risk of a renewed slide into recession, Weale warned on Monday. It would be "foolish” to rule out the possibility of a double-dip downturn, even if it was not the Bank’s central prediction, said Weale, the newest member of the Monetary Policy Committee (MPC). He also feared that the Bank’s central outlook — which is for growth of about 2.8% in 2011 and 3.2% in 2012 — could be too optimistic, the Times reports. The comment drove the pound down nearly 1 percent on the day against the dollar to $1.5373, its weakest since late June, reports Reuters. Meanwhile, Bank of America has accused the Democrats and Republicans in Congress of endangering the US economy in a game "fiscal chicken", risking a grave policy error by tightening too early. Ethan Harris, the bank's chief North American economist, said early data for August suggest that "an already weak recovery is getting weaker" with a rising risk of a relapse into recession, the Telegraph reports. The Bank's MPC is expected to keep interest rates at the record low 0.5 percent well into 2011, and the Bank has said it remains ready to add more stimulus to the economy if necessary. Sterling traded at $1.5390, by 08:05 GMT, down 0.8 percent on the day. A 1.3 percent slide in UK FTSE shares added to selling pressure on the pound, while traders cited selling by eastern European names, Reuters reports. "Whilst stock markets stay soft the FX market will stay risk-averse and I think around $1.5500 will cap the pound for the moment," a London trader said in the Reuters report. "We expect sterling to continue its downside bias as growth risks continues to point to more dovish policy up ahead," analysts at UBS said in a note, Reuters reports. "Yields have already responded in kind and we expect yield-seeking flows to begin waning," they said. The losses against the dollar also helped extend the sterling's loss against the euro, which rose more than half a percent to the day's high at 82.12 pence, and against the Japanese yen, hitting a three-month low of 129.52 yen.
|
|
Digg it! 
del.icio.us 
Newsvine 
Reddit 
Stumble It! 
