Thursday December 18, 12:39 PM
British pound dives to record low near 1.05 euros
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LONDON (AFP) - The European single currency hit another record high point against sterling on Thursday, nearing parity amid mounting British economic gloom, and climbed close to a three-month peak against the dollar.
The greenback meanwhile wallowed at a 13-year low against the yen as speculation grew that the Bank of Japan may cut interest rates on Friday to tame the Japanese currency's recent surge.
In late morning trading in London, sterling tumbled to 1.0522 euros, which was the lowest point since the creation of the single currency in 1999.
The euro also soared to 1.4719 dollars -- the highest point since September 25. It later stood at 1.4621, which was up from 1.4404 dollars late in New York on Wednesday.
Against the Japanese unit, the greenback slumped to 87.16 yen in earlier Tokyo trade, before pulling back to 87.72 in European deals, up from 87.26 yen in New York late on Wednesday.
This week, the dollar has taken a beating against both the yen and the euro after the US Federal Reserve slashed interest rates this week to virtually zero in a bid to reverse the dire economic situation.
At the same time, the British currency has plunged to a series of record low points against the euro.
"Sterling's weakness continues unabated and is lifting euro/pound to ever new record levels," said Commerzbank (Xetra: 803200 - news) analyst Ulrich Leuchtmann.
The pound plunged after minutes from the Bank of England's December 4 meeting revealed on Wednesday that policymakers mulled a steeper cut when they voted 9-0 to cut interest rates by a full percentage point to 2.0 percent.
"The trouble for the pound really began with the minutes of the rate decision, which drove the currency lower," Leuchtmann added.
"Not only was there again no dissenting vote at the meeting, but an even stronger rate cut was also discussed.
"That further increased the probability that the Bank of England will continue to lower the base rate."
Earlier this month, the BoE's nine-member monetary policy committee cut its key lending rate to the lowest level since 1951, amid mounting evidence Britain faces a deep recession.
Falling interest rates tend to weigh on currencies because they make them a less attractive investment in terms of yields.
On Tuesday, the Fed reduced the target fed-funds rate from one percent to a range of zero to 0.25 percent -- the lowest since it began publishing the target in 1990 -- and said rates would be kept "exceptionally low."
On Friday, the Bank of Japan was widely expected to cut rates from the current 0.3 percent to a range of zero to 0.1 percent, dealers said.
The meeting comes after a round of bigger-than-expected cuts by central banks around the world on Wednesday from Europe and the Middle East to Hong Kong in the wake of the Fed move.
In trading in London on Thursday, the euro changed hands at 1.4644 dollars against 1.4404 dollars late on Wednesday, at 127.05 yen (125.70), 0.9394 pounds (0.9280) and 1.5424 Swiss francs (1.5445).
The dollar stood at 87.72 yen (87.26) and 1.0647 Swiss francs (1.0720).
The pound was at 1.5411 dollars (1.5516).
On the London Bullion Market, the price of gold rose to 876.90 dollars an ounce from 870 dollars late on Wednesday.
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