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Pound breaks through $2.10 level | Pound breaks through $2.10 level |
(about 2 hours later) | |
The UK pound has climbed past the $2.10 level against the US dollar, the highest it has been in 26 years. | The UK pound has climbed past the $2.10 level against the US dollar, the highest it has been in 26 years. |
At one point, the pound touched $2.1052, before paring gains to trade at $2.1042. | |
The weakness of the dollar has also seen the euro benefit, with the single European currency strengthening to record levels against the greenback. | The weakness of the dollar has also seen the euro benefit, with the single European currency strengthening to record levels against the greenback. |
Analysts said the dollar had weakened because of speculation that US interest rates would be cut in coming months. | Analysts said the dollar had weakened because of speculation that US interest rates would be cut in coming months. |
The rally is being driven by dollar weakness as opposed to pound strength James Hughes, CMC Markets | The rally is being driven by dollar weakness as opposed to pound strength James Hughes, CMC Markets |
They also said it reflected fears that China may start offloading some of its huge dollar currency reserves in favour of other foreign currencies. | They also said it reflected fears that China may start offloading some of its huge dollar currency reserves in favour of other foreign currencies. |
And predictions that the Bank of England's monetary currency committee may keep interest rates at 5.75% on Thursday have also favoured the pound. | And predictions that the Bank of England's monetary currency committee may keep interest rates at 5.75% on Thursday have also favoured the pound. |
'Diversify reserves' | 'Diversify reserves' |
The dollar and pound were last at similar levels in September 1981. | The dollar and pound were last at similar levels in September 1981. |
Earlier, the euro jumped to a new record against the dollar, as it moved to beyond $1.47. | Earlier, the euro jumped to a new record against the dollar, as it moved to beyond $1.47. |
Another currency performing strongly against the greenback is the Canadian dollar, which currently buys more of its US counterpart than at any time since 1950. | Another currency performing strongly against the greenback is the Canadian dollar, which currently buys more of its US counterpart than at any time since 1950. |
In early trading on Wednesday, the "loonie", as the Canadian currency is affectionately known, broke through the $1.10 mark. | In early trading on Wednesday, the "loonie", as the Canadian currency is affectionately known, broke through the $1.10 mark. |
Contracts starting now are more attractive in euros Patricia Bündchen, manager of sister Gisele Model 'rejects dollar pay' | Contracts starting now are more attractive in euros Patricia Bündchen, manager of sister Gisele Model 'rejects dollar pay' |
James Hughes, an analyst at CMC Markets, said: "The rally is being driven by dollar weakness as opposed to pound strength." | James Hughes, an analyst at CMC Markets, said: "The rally is being driven by dollar weakness as opposed to pound strength." |
He added: "Speculation that the Chinese government may further diversify its currency reserves is being seen as largely responsible for this move." | He added: "Speculation that the Chinese government may further diversify its currency reserves is being seen as largely responsible for this move." |
And further speculation that oil-exporting nations have been selling dollars earned from petroleum sales to buy more euros has also boosted European currencies. | And further speculation that oil-exporting nations have been selling dollars earned from petroleum sales to buy more euros has also boosted European currencies. |
'Caught by surprise' | 'Caught by surprise' |
The fall in the value of the dollar put pressure on global stock markets, with the FTSE 100 Index losing early gains to stand lower. | The fall in the value of the dollar put pressure on global stock markets, with the FTSE 100 Index losing early gains to stand lower. |
Predictions of a weak opening for US markets caused the FTSE to slide 48 points lower by late morning. | Predictions of a weak opening for US markets caused the FTSE to slide 48 points lower by late morning. |
Among companies which fell were dollar-exposed firms such as British Airways and Royal Bank of Scotland. | Among companies which fell were dollar-exposed firms such as British Airways and Royal Bank of Scotland. |
Mr Hughes said: "The big move [in the dollar] has caught people by surprise and it has affected the US futures market, which is weighing on indexes in Europe and London." | Mr Hughes said: "The big move [in the dollar] has caught people by surprise and it has affected the US futures market, which is weighing on indexes in Europe and London." |
Other analysts said a strong euro and sterling against the dollar would harm European firms' earnings. | Other analysts said a strong euro and sterling against the dollar would harm European firms' earnings. |
"In some company reporting, we have seen the impact. BMW and paper companies have mentioned it in their reporting," said Bernd Meyer, a strategist at Deutsche Bank. | "In some company reporting, we have seen the impact. BMW and paper companies have mentioned it in their reporting," said Bernd Meyer, a strategist at Deutsche Bank. |