Pound falls sharply

Press, 26 November 1980, Page 27

Pound falls sharply

PA London The pound tumbled on foreign exchanges yesterday after the British Government cut the interest rates which have propped up its value for a year. The British currency lost 1,4 United States cents after the Chancellor of the Exchequer (Sir Geoffrey Howe) announced in Parliament that the Minimum Lending Rate (MLR) would be reduced from 16 to 14 per cent immediately. Sterling opened in London at $2.3482 in nervous trading amid speculation of an MLR cut. It traded up to $2.3550 before Sir Geoffrey’s announcement, and closed in London at $2.3417 —< the lowest for almost four months and a loss of 0.6 c over the day. In Frankfurt the British currency fell by more than one pfennig on the day to close at 4.49 marks after being fixed at 4.505 marks.

The United States dollar, strengthened by two rises in the prime interest rate last week, was steady against other major currencies.

It closed at 1.9155 marks the same as its Friday closing level, and at 1.7273 Swiss francs, slightly higher than its Friday finish of 1.7255 francs. In the United States, prime rates, at which banks lend to their best corporate customers, went up from 15.5 to 17 per cent, reflecting the Government’s attempt to slow down money supply and thus inflation. The British Government

has been following a similar strategy, raising MLR to 17 per cent in November last year. Sterling hit a high of $2.46 in late October. Dealers said that they expected investors increasingly to switch their holdings to the dollar because of the high United States rates. They expected the pound to slip further in the next few days but probably not to any great extent. Gold closed in London at $625 an ounce, more than $l2 lower than its opening quote, because of what dealers called a general lack of buying interest.