Pound Trades Near $2


The pound traded within two cents of $2 on speculation the Bank of England will lower interest rates at a slower pace than the Federal Reserve.

Britain's central bank will probably cut borrowing costs by a quarter-percentage point to 5 percent by the end of June, while the Fed reduces its main rate three times as much, to 2.25 percent, according to a Bloomberg News survey. The pound climbed to its highest in almost two months versus the dollar yesterday.

The U.K. currency rose to as high as $1.9848, and was little changed at $1.9820 by 9:42 a.m. in London. It touched $1.9972, the highest since Jan. 1, yesterday. It's little changed against the dollar this month.

The pound was also at 76.18 pence per euro, from 76.32 pence yesterday, when it reached 76.39, the weakest since the common currency's introduction in 1999. The U.K. currency has fallen 1.9 percent against the euro this month.

The pound may be buoyed after Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank, posted an 18 percent gain in 2007 profit even as it wrote down 2.5 billion pounds ($4.9 billion) for bad loans and losses on credit market-related securities.

Bank of England policy makers have signaled they may have limited scope to lower rates further to spur economic growth after two cuts in three months, as record energy costs stoke inflation. The price of oil reached an all-time high of $102.08 a barrel yesterday, taking its advance this year to 3.6 percent.

Borrowing costs in the U.K. are the highest among Group of Seven nations, making it more attractive for investors to hold the country's currency.


TradingEconomics.com, Bloomberg
2/28/2008 7:33:31 AM