Sterling close to $2

Based on article from The Times, The FT, 24 January 2007

The pound reached a 14 year high against the dollar as it reached a peak of $1.9917. This is the highest it has reached since Britain was ejected from the European Exchange Rate Mechanism in 1992, shortly before its Black Wednesday crash.

The rise in the price of the pound has come amid further expectations for the Bank of England to raise interest rates again as they see further fresh signs of mounting inflation.

Higher interest rates have also seen the increase in demand for "hot money", in seach of short term returns resulting in a higher demand for the pound sterling.

A stronger sterling will be a disadvantage to exporters and the tourism industry as it becomes more expensive for foreigners to buy pounds. But it makes imports and foreign travel cheaper for Britons. However, the Bank of England is not as concerned about this because it helps to keep inflation under control.

Links:
Sterling hits 14 year high - The FT