Friday, November 30, 2007

Dollar heads down... and sterling will follow

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Source: Money Week


"There is no relief in sight for the sliding dollar, which is at record lows of almost $1.50 against the euro.

Further US interest-rate cuts are expected as the economy worsens, while signs that China and other Asian and Middle Eastern countries are less likely to prop up the dollar in future are eroding confidence in its status as the world’s reserve currency.

The “latest scare” in this context is that the Gulf states may now loosen their ties to the dollar, “depriving the foreign-exchange markets of a reliable buyer” of the ailing currency, says The Economist..."

"The same could be said of sterling, which has slid to a four-and-a-half-year low against the euro and lost around 7% against the yen in the past fortnight...

In addition, Britain has similar problems to the US: a large current-account deficit and a housing market looking vulnerable to a nasty slide. By early next year, says HSBC’s David Bloom, sterling will be sliding against the dollar too".

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