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US spending spree sends pound soaring against dollar
Hugo Duncan19.03.09
The dollar collapsed today after traders gave the thumbs down to US Federal Reserve plans for a drastic $1 trillion spending spree to revive America's economy.
Sterling was up 5.62 cents to $1.4532, its biggest one-day gain since 1985, as the greenback tumbled against a host of currencies including the Japanese yen and the euro, which was up 5.59 cents to $1.3669.
It came as analysts warned the ambitious decision by the Fed to start “printing money” could be an indication that the US economy is in even worse shape than originally feared.
“The dollar was taken to the woodshed and beaten like a dog, and after a short rest, beaten like a dog again,” wrote currency strategists at RBC Capital Markets. “Market sentiment on the Fed's manoeuvre was crystal clear.”
In a surprise move last night, the Fed said it would mimic the Bank of England's strategy of quantitative easing”, buying up to $300 billion of Treasury bonds over the next six months to drive down interest rates and fuel economic growth.
It also said it will buy $750 billion of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac on top of the $500 billion it has already spent.
Reader views (8)
I am left in some confusion by Mr. Keith Price – is he ‘for real’ as the latest lingo goes?! Mr. Price is either being extremely sarcastic or has no comprehension on the current situation whatsoever. It appears that fellow commentators also agree that Gordon Brown has been disastrous to the U.K., and the big holes and bills that our unelected Prime-minister has created shall be a noose around the necks of our children and us for many, many years.
- Dr. N. Sivathasan, London, U.K.
Keith Price...."Well Done GB"? Are you mad? He sold the nations gold at the low, created a complex tax credit system so convoluted even he doesn’t know how it works, pushed ahead with the NHS computer system debacle, lowered banks capital adequacy ratios (people have forgotten this one!), missed the housing bubble and its disastrous consequences, made the FSA one huge inept vehicle, increased taxes to record levels, created the schooling PFI which has now left hundreds of schools as bankrupt building sites and generally been running around like a headless chicken mortgaging our nations future by borrowing and borrowing some more. Please inform me of just one thing which he has done to the betterment of the nation! Without doubt the worst chancellor and possibly prime minister this country has experienced.
- Richard, Colchester
Is Keith Price in La La Land. No I,v just realised the pennys dropped , he,s a Banker, No wonder he,s happy. Regretably we arnt all Bankers and have to tough out the Brown inflicted blight of all our finances.
- Peter French, Orihuela Costa Spain
That so-called trillion dollar spending "spree" is going to be paid for by the next 2 or 3 generations of Americans (that's not counting the undoubted cost of the minimum next four years of new age socialism in America) - a massive deferred debt, nothing more. It is a make-believe "doing something about the problem" sleight of hand trick. GB will like it though - he's fond of putting bandaids on badly rent flesh of the body public.
- Rogan, Irving
Keith Price, are you one of the Labour party moles who tries to generate positive press for the party when it's in total disarray?
No. We haven't had a Tory govt since 1997 and VrBritain has been much better for it. My own finances have never been so good. I bet yours haven't either. Well done Gordon brown
- Keith Price, Luton, England
Keith Price, are you one of the Labour party moles who tries to generate positive press for the party when it's in total disarray? The point is, this is nothing to do with Gordon Brown, it's a vote of no-confidence in the dollar!
- Marianne, SW France
Gordon Brown's actions are already beginning to bear fruit for resurgent Britain. Well done Prime Minister
- Keith Price, Luton, England
Lets buy $300 billion of bonds while the price is really high and then sell them back into the market when the price is really low (when interest rates have gone up).
The $200 billion loss can be added to national debt.
Can they really not see why that is a really bad idea?
- Badger, London
