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Sterling slides to two-year low against dollar

Latest update : 2008-08-15

The British pound fell to 1.8512 dollars, its lowest point since July 2006. The Bank of England is expected to cut interest rates to bolster economic growth. The slump in British currency is the latest indication of a gloomy global economic horizon.

The British pound hit a two-year low point against the dollar on Friday as dealers predicted interest rate cuts from the Bank of England to combat flagging economic growth, analysts said.

Sterling slumped to 1.8512 dollars -- the lowest point since July 26, 2006. It later Friday stood at 1.8530, from 1.8677 in New York on Thursday.

The pound has shed more than 12 percent in value since hitting a 26-year high of 2.1161 dollars on November 9.

The British currency dived lower this week after the Bank of England issued a gloomy economic outlook.

The central bank had Wednesday said that British inflation could fall sharply toward the government's target of 2.0 percent from early 2009, which prompted traders to bet on interest rate cuts sooner than previously expected.

Barclays Capital analysts have said that they now expect quarter-point rate cuts in Britain in November, February, April, and May.

"The surprise was not so much that the next move in rates is likely to be down -- that has been our forecast for some time -- but that the (central bank) seems happy to nurture this expectation," Barclays Capital analyst Simon Hayes said on Friday.

Date created : 2008-08-15