The British currency has slumped 7 percent versus the dollar this year as the credit crunch has starved the housing market of loans and threatened to push the economy into recession. The number of loans approved slumped to the lowest since at least 1997 in June, the British Bankers' Association said last month. The Bank of England may cut interest rates this year, according to Bloomberg News survey of economists.
The pound traded at $1.8368 by 9:07 a.m. in London, near the lowest level since July 2006, from $1.8532 yesterday in New York. Against the single European currency, the pound rose 0.2 percent to 79.45 pence after the Munich-based Ifo institute's business climate index fell to a three-year low in August.
The British currency dropped against the euro and the dollar last week after a government report showed economic growth stagnated in the second quarter, adding to pressure on the central bank to cut interest rates to revive the economy, the second largest in Europe.