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Pound suffers as dollar rebounds Pound suffers as dollar rebounds
(about 12 hours later)
The dollar has hit a six-month high against the euro and its highest in almost two years against the pound. The pound remained weak against the dollar after hitting 21-month lows as traders fretted over economic growth.
The US currency has bounced back from record lows against euro on fears that European growth may slow sharply. Sterling recovered slightly to $1.9029, from earlier lows of $1.8923 amid fears the Bank of England inflation report could deepen growth concerns.
The UK is also struggling with high inflation and faltering growth, causing a slide in sterling. Recent official figures have already shown the UK is struggling with high inflation and faltering growth.
The European currency hit a six-month low of $1.4812, while the pound fell to $1.8997 having hit its lowest since November 2006 at $1.8967. Meanwhile, concerns about European growth have also helped the dollar bounce back from record lows.
In early trade the euro stood 0.1% higher at $1.4937, well off lows of $1.6038 hit last month.
Commodity boostCommodity boost
The US economy is still suffering from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has buoyed the currency's standing.The US economy is still suffering from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has buoyed the currency's standing.
The falling price of commodities, that are priced in dollars, has also helped the US currency. Investors had bought oil and gold to protect against dollar weakness but they are now unwinding those positions.The falling price of commodities, that are priced in dollars, has also helped the US currency. Investors had bought oil and gold to protect against dollar weakness but they are now unwinding those positions.
The euro has been further undermined by military conflict in Georgia that could disrupt European markets.The euro has been further undermined by military conflict in Georgia that could disrupt European markets.
However, analysts cautioned that the dollar's rally might not be sustainable.However, analysts cautioned that the dollar's rally might not be sustainable.
"The scope for a much faster recovery in the dollar is still limited by relatively poor economic fundamentals in the US," said Julian Jessop, chief international economist at Capital Economics."The scope for a much faster recovery in the dollar is still limited by relatively poor economic fundamentals in the US," said Julian Jessop, chief international economist at Capital Economics.