Pound Slides to 17-Month Low Vs Dollar


The pound dropped to a 17-month low against the dollar on concern the economy is edging toward a recession as U.K. banks repossessed the most homes in 12 years in the first half and house prices lost two years of gains.

The British currency slid for a sixth day, falling below $1.93 for the first time since March last year. The number of home foreclosures jumped 41 percent from the previous six months as the credit squeeze left more consumers unable to pay their record debts, data from the Council of Mortgage Lenders showed. The Bank of England left interest rates on hold yesterday at 5 percent.

The British currency fell to $1.9216, the lowest level since March 14, 2007, and was at $1.9262 as of 12:35 p.m. in London, from $1.9439 yesterday. It lost 2.5 percent since Aug. 1 and was headed for its biggest weekly slump in three years. It traded at 78.46 pence per euro, from 78.83, down 0.4 percent in the week.

A record drop in U.K. house prices has erased two years of gains, the London-based Times newspaper said, citing statistics from mortgage lender Halifax, a unit of HBOS Plc.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, kept the main interest rate for a fourth month after inflation accelerated and the economy edged toward a recession.

U.K. services, manufacturing and construction shrank in July and house prices dropped the most in a quarter-century, while King predicts consumer-price growth will soon accelerate to more than double the 2 percent target.

The pound has slipped 3 percent versus the dollar this year and 6.8 percent against the euro.


TradingEconomics.com, Bloomberg
8/8/2008 6:55:18 AM