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| Version 3 | Version 4 |
|---|---|
| Pound reaches 26-year dollar high | Pound reaches 26-year dollar high |
| (40 minutes later) | |
| Sterling has continued to climb against the US dollar, moving above $2.01 - the highest rate since June 1981. | Sterling has continued to climb against the US dollar, moving above $2.01 - the highest rate since June 1981. |
| The currency broke through the $2 level on Tuesday after unexpectedly high UK inflation figures indicated further UK interest rate rises were likely. | The currency broke through the $2 level on Tuesday after unexpectedly high UK inflation figures indicated further UK interest rate rises were likely. |
| The Bank of England is widely expected to raise rates to 5.5% on 10 May and at least once more later in the year. | The Bank of England is widely expected to raise rates to 5.5% on 10 May and at least once more later in the year. |
| The dollar is also at two-year lows against the euro and 17-year lows against the Australian dollar. | The dollar is also at two-year lows against the euro and 17-year lows against the Australian dollar. |
| One dollar was worth 0.735 euros and 1.195 Australian dollars. | One dollar was worth 0.735 euros and 1.195 Australian dollars. |
| Inflationary threats | Inflationary threats |
| The pound was strengthened further by the release of the minutes of the Bank of England's last interest rate meeting at which two of the nine members voted for an immediate rate rise. | The pound was strengthened further by the release of the minutes of the Bank of England's last interest rate meeting at which two of the nine members voted for an immediate rate rise. |
| Official figures also showed that average earnings rose at an annual rate of 4.6% over the three months to February, which is the fastest rate for almost three years. | Official figures also showed that average earnings rose at an annual rate of 4.6% over the three months to February, which is the fastest rate for almost three years. |
| The Bank of England is concerned that the current rate of inflation will encourage workers to press for higher wage settlements, which would create more inflation. | The Bank of England is concerned that the current rate of inflation will encourage workers to press for higher wage settlements, which would create more inflation. |
| The Office for National Statistics points out that the rise in average earnings came entirely from bonuses, but those can still be inflationary. | The Office for National Statistics points out that the rise in average earnings came entirely from bonuses, but those can still be inflationary. |
| 'Most pronounced' | 'Most pronounced' |
| "Sterling's rise above $2 is a consequence of both sterling strength and dollar weakness," said Howard Archer, an economist at Global Insight. | "Sterling's rise above $2 is a consequence of both sterling strength and dollar weakness," said Howard Archer, an economist at Global Insight. |
| Pound/dollar exchange rate class="" href="/1/hi/business/6567821.stm">Q&A - strong pound winners and losers | |
| "While there is no denying that the pound is strong overall, it is also notable that the dollar is trading at a two-year low against the euro." | "While there is no denying that the pound is strong overall, it is also notable that the dollar is trading at a two-year low against the euro." |
| Analysts said that concerns about a slowdown in the US economy and the fact that interest rates may have to come down to safeguard growth were behind the dollar's weakness. | Analysts said that concerns about a slowdown in the US economy and the fact that interest rates may have to come down to safeguard growth were behind the dollar's weakness. |
| Higher interest rates increase demand for a currency as investors look to buy into assets that offer higher yields. | Higher interest rates increase demand for a currency as investors look to buy into assets that offer higher yields. |
| "The negative dollar sentiment right now is related to the US economy's potential for further slowdown and therefore rate cuts from the Fed," said David Powell, senior currency strategist, at IDEAglobal. | "The negative dollar sentiment right now is related to the US economy's potential for further slowdown and therefore rate cuts from the Fed," said David Powell, senior currency strategist, at IDEAglobal. |
| "We do expect the US to return to trend growth toward the end of the year," he added. | "We do expect the US to return to trend growth toward the end of the year," he added. |
| "But in the meantime, we could be in for a period of sustained dollar weakness and we expect that to be most pronounced against the euro and sterling in the coming days and weeks." | "But in the meantime, we could be in for a period of sustained dollar weakness and we expect that to be most pronounced against the euro and sterling in the coming days and weeks." |