Pound hits 26-year high

Source: Exec Digital UK

Date :03/07/2007 10:58:37

The pound has reached a new 26-year high against the US dollar as investors look ahead to an anticipated UK interest rate rise later this week.

In early trade in Europe, one pound touched $2.0181.

Analysts expect the Bank of England to raise interest rates to 5.75% tomorrow in an attempt to keep inflation under control.

Expectations of higher rates make the pound popular among currency investors, as they can gain a higher return.

The US Federal Reserve again kept its interest rate on hold - and there are predictions that rates will remain stable amid a US housing slowdown.

The dollar was also weaker against the euro, although the European Central Bank is tipped to hold the benchmark rate to 4 percent this week.

UK exporters are expected to be hit as their goods become more expensive.

Last month, Bank of England minutes showed that the main rate-setting committee voted by five members to four to freeze rates at 5.5 percent.

Some analysts expect UK interest rates to be as high as 6 percent by the end of this year.

July 3 2007