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The dollar fell to seven-month lows against the pound and the euro today as rising share prices across the world and positive economic data from China and the US saw demand for more risky currencies rise.
US Treasury Secretary Timothy Geithner was forced to defend the dollar as he spoke in Beijing this morning. China is the largest single holder of US Treasury bonds in the world with holdings of $768 billion.
"Chinese assets are very safe," said Geithner, which drew laughter from his audience of students, many of whom are sceptical about the scale of the country's dollar deposits.
But Geithner stressed: "How successful we are in Washington and Beijing will be critically important to the economic fortunes of the rest of the world.
"The global recession seems to be losing force. The financial system is starting to heal."
He said the Obama administration would cut its deficit and promised "very disciplined" future spending.
"We believe in a strong dollar and we're going to make sure that we repair and reform the financial system so that we sustain confidence," Geithner added.
Forex traders said there was strong demand for riskier currencies on the basis that the world economy is improving.
The pound rose 1.64 cents to $1.6294, while the euro was 0.44 cents up at $1.4194.
Reader views (5)
The nose dive was even steeper in the West End Final which had £1 = $6403!
Anyone know any bank offereing this rate of exchange?
- Melvyn Windebank, Canvey Island, Essex, 01/06/2009 20:51
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Sebastian Brent - Spot on. Sadly.
- Dave Davies, Basingstoke, 01/06/2009 17:53
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A lot of people saw the collapse of GM coming. It was throwing good money after bad. It will be difficult to see how GM will be viable as a going concern.
Also if things continue along the same lines there, is a high probability that the credit card market will cease to exist anymore. At this moment in time there are millions if credit card defaulters who arent in work. We will see this in america first. American Credit Card companies are already hiding massive deficits that cant be ignore any longer. The UK is behind the US by 6 months in this regard.
- Sebastian, brent, 01/06/2009 16:16
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US should default on its debts and let the totalitarian, undemocratic regime in China, with its appaling human rights record, go down the economic drain.
- Adam, HARROW, UK, 01/06/2009 11:13
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This is great news, but any chance the pound could stay weak until after I visit in august for the ashes test?
- Damien Crossling, Naracoorte, South Australia, 01/06/2009 10:46
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