Pound hits 23-year dollar low as Britain falls into recession
LONDON - THE British pound on Friday struck a 23-year low point against the dollar and fell close to its all-time nadir versus the yen as Britain officially entered recession.
Sterling dropped to US$1.3503 in morning London trade - the lowest level since September 1985.
Sinking pound rattles Britain
LONDON - A PLUNGING pound. Surging unemployment. Worries the banking system may collapse and take the country's credit rating with it.
Fears are growing that Britain's economy is falling off a cliff amid the world financial crisis. Growth figures due on Friday could show the country in its worst downturn in nearly 30 years, capping a terrible week that saw unemployment figures surge and mounting talk that the country's debt could face a humiliating downgrade.
The euro slid to US$1.2780 from US$1.3001 in New York late on Thursday.
'The dollar stands to find further confidence as traders look for the safest bet in these turbulent times,' said CMC Markets analyst James Hughes.
Britain is in recession for the first time since 1991 after its economy shrank during the final two quarters of last year as a global financial crisis raged, official data showed on Friday.
The Office for National Statistics (ONS) said that gross domestic product (GDP) had shrunk by 1.5 per cent in the fourth quarter of 2008 compared with the previous three-month period, when it contracted by 0.6 per cent.
The generally-used technical definition of a recession is two quarters running of negative economic growth.
The figure for the final quarter of 2008 showed the biggest fall in GDP since 1980.
Investors on Friday also digested the latest batch of weak US economic data, showing weekly jobless claims at a 26-year high and housing construction starts and building permits at half-century lows.
The market reaction was muted because traders had already factored in the weak US economy, said Hachijuni Bank foreign exchange dealer Masatsugu Miyata.
'The data were certainly bad but they hardly invited fresh selling. We already know the US economy is so bad,' Mr Miyata said.
The euro stayed weak owing to concern over the health of European banks and the euro zone economy, he added.
Dealers said they were waiting for fresh cues, including corporate earnings. General Electric was due to release 2008 results later on Friday.
The dollar 'may retreat' to the 87-yen level next week if worse-than-expected figures deal a further blow to sentiment, boosting the yen as a haven, another dealer at a Japanese bank told Dow Jones Newswires.
US President Barack Obama's treasury secretary-designate Timothy Geithner voiced support for a strong dollar in written answers to questions from US senators released on Thursday, but the market impact was limited.
'A strong dollar is in America's national interest,' MR Geithner wrote to members of the Senate Finance Committee as part of his confirmation process, upholding a fundamental tenet of the previous administration of Mr George W. Bush.
In London trading, the euro changed hands at US$1.2780 against US$1.3001 late on Thursday, at 112.86 yen (115.59), 0.9424 pounds (0.9370) and 1.4937 Swiss francs (1.4980).
The dollar stood at 88.21 yen (88.89) and 1.1675 Swiss francs (1.1521).
The pound was at US$1.3575 dollars.
On the London Bullion Market, the price of gold jumped to US$868.30 an ounce from US$860 late on Thursday. -- AFP
