The situation has been made worse because largely unregulated hedge fund activity is not confined to stocks and shares. It is much wider in that it has embraced commodities and currencies. The biggest hedge fund currency play has been the yen carry trade, by which geared hedge funds borrowed yen at nominal interest rates and bought higher yielding currencies such as the New Zealand dollar where they obtain over 6% on deposit and even sterling, where 4.5% is available. Because these funds are now in very serious trouble in order to repay their debts usually denominated in dollars, they are selling higher yielding currencies such as sterling, repaying their yen debt and then converting the yen back into dollars in order to pay their ultimate debt to the investment banks which is in dollars. Hence the extraordinary strength of US Treasuries, given the fiscal and trade deficits.
This accounts for the strength of the yen and of the dollar and for the weakness of higher yielding currencies such as sterling.
It's odd, I assumed Obama becoming president would have lowered the amount of $'s per £, but the day he was elected it actually went up to 1.5825 to the £.
It's now gone down to 1.5675. :S
Getting the right man for the job in US should strengthen the US economy and the $, which is worse for UK tourists. I guess biggest factor today is slashing base rate to 3%, a bit of a panic move many did not expect, meaning they are expect the recession to hit hard, not good for the £.
Yep, the interest cut means the pound is going to tumble even more. Better get buying those dollars, IMHO.that cut in the interest rate should send the pound into an even steeper tailspin against the dollar
Yep, the interest cut means the pound is going to tumble even more. Better get buying those dollars, IMHO.
You can't measure the effect of an interest rate change on the exchange rate after one day! Over the next 3-4 weeks most key economic forecasters predict further decline in the pound against the dollar. Obviously it will fluctuate up-and-down from day-to-day...the key is to look at longer term trends. PPP is $1.50 so that's probably where it will settle out eventually.It means nothing in the current market. New rules are being written every day. At 1am this morning the $/£ rate was $1.55 its now $1.58 up 3 cents.
Toss a coin and you have as much chance as an expert of getting the right direction.
How wrong was this forcast? Maybe they have it right for next year
http://www.forecasts.org/pound.htm
How wrong was this forcast? Maybe they have it right for next year
http://www.forecasts.org/pound.htm