Pound Falls to 7-Week Low Vs Dollar


The pound declined to the lowest level in seven weeks against the dollar as U.K. factory production unexpectedly shrank for a fourth month in June.

Britain's currency slipped most against the yen as traders added to bets the Bank of England will leave interest rates unchanged this year. The pound also dropped for a third day versus the dollar after a separate report showed the country's services industries contracted in July.

The pound slid to as low as $1.9525, the weakest level since June 18, and was at $1.9552 by 2 p.m. in London, from $1.9623 yesterday. It climbed to 79.18 pence per euro, from 79.41 pence.

Against the yen, the pound slipped as much as 0.9 percent to 210.60, the lowest level since July 17, from 212.46 yesterday

Factory output fell 0.5 percent from May and was 1.3 percent lower than a year earlier, the Office for National Statistics said today. Economists forecast a gain of 0.1 percent on the month, according to the median of 30 estimates in a Bloomberg News survey.

An index based on replies on sales and business conditions from about 700 service companies rose to 47.4, from 47.1 in June, according to The Chartered Institute of Purchasing and Supply. A reading below 50 shows contraction.

Traders pared bets on an interest-rate increase this year, with the implied yield on the March short-sterling futures contract dropping 2 basis points to 5.38 percent. The nation's benchmark rate is 5 percent.

Policy makers kept borrowing costs on hold at their July 10 meeting after lowering them three times since November in a bid to stave off a recession in the face of accelerating inflation. They will keep it on hold again on Aug. 7, according to all 60 economists surveyed by Bloomberg.


TradingEconomics.com, Bloomberg
8/5/2008 6:25:20 AM