Pound falls to lowest level against the dollar since 1985
The pound fell to its lowest level against the dollar since 1985 last night amid growing fears that the Government will have to nationalise high-street banks.
By Robert Winnett
Last Updated: 8:08PM GMT 21 Jan 2009
Pound falls to lowest level against the dollar since 1985
One pound now buys less than $1.37 - compared to more than $2 last summer - after international currency speculators moved in to profit from concerns over the British economy.
One pound now buys less than $1.37 - compared to more than $2 last summer - after international currency speculators moved in to profit from concerns over the British economy.
Experts predict it is likely to fall to $1.30 or below in the next few days.
Sterling also fell sharply against the Euro and reached a record low against the Japanese yen.
The falls have come following sharp reductions in the share values of major high-street banks such as Barclays, Lloyds and Royal Bank of Scotland (RBS).
This has led to fears that several banks may have to be nationalised which could have devastating effects on the public finances. The assets of RBS and Lloyds Banking Group are in excess of the total value of the British economy and experts believe that billions of pounds of their debts may never be repaid.
Mervyn King, the Governor of the Bank of England, has also indicated that more money may effectively have to be printed in the next few months to kick-start the British economy. Analysts at Barclays predicted yesterday that interest rates will soon be cut to zero percent.
Jim Rogers, a former partner of George Soros, the speculator who made $1 billion from the collapse of sterling on black Wednesday in September 1992, yesterday stepped up his attack on the British economy.
He said that the City of London was now "finished" and that the UK had nothing to offer once North Sea oil reserves ran out. "It's simple, the UK has nothing to sell," he said.
Another currency speculator added that "the UK is imploding" last night.
Government ministers have repeatedly refused to comment on the reduction in the value of the pound. However, the French finance minister yesterday called on the Bank of England to intervene.
Christine Lagarde, the French finance minister, said: "The Bank of England does what it can, but its monetary policy, its rate management isn't very efficient in providing more support for the British currency. I believe it's in its interests to support it a little more."
However, one of the world's biggest investment banks said that the fall in the value of the pound had been "overplayed". Goldman Sachs said it was "bullish" on the pound and said it believed the "picture in the UK is not as poor as many people try to portray."
:: How the exchange rate affects shoppers:
An 8GB Ipod Nano priced $149, set a British shopper back £76.18 one year ago, but now costs them £108.22.
A pair of men’s Abercrombie & Fitch jeans priced $79.50, set a British shopper back £40.65 one year ago, but now costs them £57.74.
A double room at the Waldorf Astoria Hotel in New York priced $259, set a British holidaymaker back £132.43 one year ago, but now costs them £188.12.
A one-day adult ski pass in Aspen priced $96, set a British holidaymaker back £49.08 one year ago, but now costs them £69.73.
A one-day admission ticket to Universal Studios Hollywood priced $67, set a British tourist back £34.26 one year ago, but now costs them £48.66.
Note: Calculated using exchange rates for 21/01/08: £1 = $1.9558; 21/01/09: £1 = $1.3768
No comments:
Post a Comment