Dollar takes a pounding

U.S. one dollar bills

TEXT OF STORY

MARK AUSTIN THOMAS: On the foreign exchange this morning the U.S. dollar is getting a pounding in every sense. The greenback has fallen to a 14-year low against the British currency. From London, Stephen Beard reports.


STEPHEN BEARD: Not since September 1992 has the British pound been higher against the dollar. The factors driving it up are precisely opposite to those driving the U.S. currency down.

While dealers fret about American house prices falling off a cliff and dragging interest rates lower, here the belief is that UK rates must rise to curb an excessively buoyant housing market, says Andrew Hilton of the CSFI think-tank:

ANDREW HILTON: The latest data just out shows that UK house prices rose almost 10% over the past year. That's a bubble and in the end the markets are absolutely confident that the Bank of England is going to have to raise interest rates

But with U.S. house prices down 4% according one measure, currency dealers expect lower U.S. interest rates too. There's a widespread view that it won't be long before we see the $2 pound.

In London, this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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