The pound has reached its highest level against the US dollar since November 2008, trading this morning at $1.61.
The news has been welcomed by British buyers of property in Florida, as well as businesses importing from the States or any other region where sending US dollars abroad is required to make payment.
The dollar is also at its weakest against the Euro this year, trading at above $1.41.
The weakness in the American currency has been largely caused by the return of ‘risk appetite’ in international investors. Instead of holding dollar cash reserves, there has been a movement to international equities (shown by a rise in many stock markets around the world) – and as a currency is sold off in this way, demand for it is reduced and hence also its price falls.
There have also been some worse than expected data releases from the States, including in jobs and construction.
Whether the rally can continue will depend much on currency market news out this week. Today sees American personal consumption data released at 1.30pm, which is expected to cause volatility. This side of the Atlantic, we have the Bank of England’s monthly interest rate announcement on Thursday, which is watched for any news on the quantitative easing programme as much as the interest rate decision itself which is unlikely to show any change.
With that in mind, demand for fixed exchange rates based on the dollar’s current position has increased. Companies importing from the states, as well as British buyers of American holiday homes, can lock into an exchange rate for up to 2 years ahead by using a reputable currency broker in the UK.
