Sterling faces more turmoil

12 April 2012

The battered pound faces a third straight day of turmoil after falling to its lowest level for nearly 24 years against the dollar.

Fears about the UK economy and the country's soaring national debt saw sterling slump to 1.36 against the greenback at one point on Wednesday before recovering a few cents. It was last as low in 1985.

The latest dive in value - which leaves UK tourists facing much dearer foreign holidays - came as figures revealed the country's net borrowing soared to a higher-than-expected £14.9 billion in December.

It also emerged that public sector net debt, excluding liabilities from banking bail-outs, rose to 40.4% of GDP, above the 40% target used until recently as the government's sustainable investment rule. The inclusion of the £20 billion recapitalisation for Royal Bank of Scotland sent the figure to 47.5% of GDP.

On Tuesday the pound-dollar rate fell below the psychological 1.40 barrier as fears over the latest UK bank bailout and overall economic picture mounted.

Analysts are pondering whether the UK's debt rating could now be downgraded - meaning UK Government borrowing could become more expensive. And full-blown nationalisation of one or more of the big UK retail banks remains a spectre hanging over the market.

Sterling also remains weak against the euro, with the single currency now worth more than 93 pence.

The pound has suffered steep falls against the dollar over the past year since hitting a high of 2.04 in March last year.

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