Pound slips again

The pound tell back below 91p again yesterday, as sterling resumed its onward march, writes Jane Suiter.

The pound closed at 90.75p from 91.33p a day earlier and at DM2.6075 from DM2.6203.

Traders said the pound was being sold at over DM2.61 against the pound and bought at around 90.5p, effectively cancelling one another out.

Dr Dan McLaughlin, chief economist at Riada Stockbrokers, said one reason for sterling's rise was the expectation of further rate rises. "When that is delivered, sterling will come back," he said.

However, the other reason for sterling strength is that many international investors are buying sterling and the dollar and moving out of deutschmarks as fears that the euro may be a weak currency increase.

To what extent and for how much longer that will continue is difficult to tell.

He added that sterling was likely to head towards DM2.90 in the short term, which could mean the pound heading for 90p. However, that would necessarily lead to a rate rise, he added.

According to Dr McLaughlin, the trade weighted exchange rate is most important for rate rises. The last rise occurred when the index was 65, he noted. It is currently almost 2 per cent above that level at 66.5.