Dollar Rockets To New 6-Year High Versus Sterling

The dollar hit a fresh 6-year high versus the sterling and held its ground against other major currencies Wednesday morning in New York.

Traders reacted to indications that the Bank of England will further cut interest rates in a desperate effort to stem the tide of economic weakness.

On November 6, the UK central bank reduced the bank rate by a bigger-than-expected 1.5 percentage points to 3% in a bid to alleviate the mounting pressures on economy.

Wednesday, the Bank of England Governor Mervyn King said the Monetary Policy Committee is certainly prepared to cut interest rates gain if necessary. The BOE issued a the downward
revision to the inflation outlook in its quarterly report on inflation, cementing expectations for more rate cuts.

The dollar surged to 1.5200 versus the sterling, reaching its highest level since 2002. The buck has been rising steadily against the sterling for the past few months as traders flocked to the safety of the lower-yielding currencies.

Against the euro, the dollar was steady near 1.2500, hanging around yesterday's 2-week high of 1.2475. Back on October 27, the buck hit a 2 1/2-year peak of 1.2328.

The dollar continued to see very little movement versus the yen, staying near 97 Wednesday morning. The buck has stabilized since hitting a 13-year low of 90.88 a few weeks ago.

Demand concerns have kept the price of oil below $59 a barrel in electronic dealing, giving the buck a bit of a boost versus its petro-linked Canadian counterpart. The dollar hit a 12 -day high of 1.2125 versus the loonie, extending last week's modest gains.

Treasury Secretary Henry Paulson will speak Wednesday morning on the $700 billion financial bailout program. Democrats in Congress are ratcheting up the pressure on the Bush Administration to provide emergency assistance to the ailing American auto industry.

Related Post :
1. BOE Prepared to Cut Rate

Source :
1. Dollar Rockets To New 6-Year High Versus Sterling Wednesday morning,11/12/2008 8:02 AM ET.