The UK pound has hit an all time high against the US dollar at $2.067 per pound last Tuesday. Such high level of appreciation of the UK pound against US dollar occurred last twenty-six years back, on 5 November 1980 when the dollar touched a low of $2.446 per pound.
The devaluation of the US dollar compared with the pound is attributed to strong speculations of an impending cut in the Fed Rate by a quarter of a percentage point on Wednesday, in an attempt to limit the impact of a US housing market slowdown. For similar reasons, the Fed had last month gone for half a percentage cut in its main interest rate to 4.75% from 5.25%.
The depreciating dollar had caused investors to exchange dollars for pounds for better return. However, an appreciating currency is not good news for all, especially for the UK exporters exporting goods across Atlantic. Goods exported from UK is becoming more expensive for her overseas customers, eroding the profitability of UK firms. However according to the EEF manufacturers’ organization, a strong world economy, a shift away from price sensitive activities and the fact that costs are spread across the globe cushioned UK manufacturers from its worst effect.
There is also bad news for the UK tourism industry. Appreciating pound means less North American visitors to the country. The number of visitors from North America had already fallen in the first six months of the current year.
There is however good news for those British travelers planning a trip to the US this Christmas. An undervalued US dollar will make their trip cheaper.
Source:BBC
Comments
A falling dollar has wrecked havoc on all nations that have their economies linked with this currency.
An expensive pound means that American exports will become cheaper for Britain and other European nations where the US oil import bill is bound to rise leaps and bounds.
The average lifestyle of an American is being hit as never before.
After all, its all about money, honey.