Pound hits 26-year high fuelling further interest rate hike


Last updated at 00:23 03 July 2007

The pound reached a 26-year high

against the dollar yesterday as currency

speculators began betting on

another increase in interest rates.

Having breached the psychologically-

important $2 barrier last

week, sterling added two cents to

trade at $2.02 last night.

The last time the pound was at

these levels, Ronald Reagan was in

the White House and Bucks Fizz were

topping the charts.

The rise is good news for tourists

heading to the U.S., but British firms

exporting to America will find their

goods are less competitive. Imports

from the U.S. will be cheaper.

Experts said the pound was likely

to stay above the two-dollar mark

for some time as more rate rises are

predicted from the Bank of England's

monetary policy committee

to try to keep a lid on inflation and

calm the runaway housing market.

Economist Howard Archer, of Global

Insight, said: "The pound is being

buoyed by general belief that the

Bank will lift interest rates to 5.75 per

cent on Thursday."

A quarter point rise to 5.75 per cent

will put rates half a per cent higher

than those in the U.S. That means

investors will make a bigger return

on their money if it is in sterling than

if they keep it in dollars.


about the U.S. housing slowdown

have also helped weaken the dollar.

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