Pound hits 26-year US dollar high

Pound hits 26-year US dollar high

The UK pound has hit its highest

level against the US dollar

in 26 years.

The pound has gained on the perception that US interest rates will be cut this week, while UK interest rates will be left unchanged next week.
When UK rates are higher than US rates, investors are encouraged to exchange dollars for pounds to benefit from better rates of return.
At one point the pound touched $2.070, before paring gains to $2.067, while the dollar sank to a new euro low.
The last time the pound was at these sorts of levels was 5 November, 1980, when it reached $2.446.
Many analysts expect the Federal Reserve, the US central bank, to cut interest rates by a quarter of a percentage point on Wednesday, in an attempt to limit the impact of a housing market slowdown.
The Fed cut its main interest rate by half a percentage point to 4.75% from 5.25% last month, after problems in the housing market were seen to be spreading to the wider economy.
The move sent the greenback in a downward spiral against the euro, sliding to a new record low on Tuesday at $1.4444, its third record low in as many days.

Recession risks

House prices in the US have been falling and the number of foreclosures has surged in recent months after the Fed spent almost two years between 2004 and 2006 raising rates in an attempt to slow inflation.
While inflation fears have been simmering in previous months, mainly stoked by the surging oil price, many analysts now say that the biggest worry is consumers reining in their spending.
Should that happen, they argue, the US economy could splutter into a recession.
The next decision from the Bank of England's interest rate setters is due on 8 November, when they are expected to leave rates unchanged at 5.75%.
The perception that there will be no change has been strengthened by comments from one of the Bank's policy makers, Kate Barker.
In an interview with the Guernsey Press and Star, Ms Barker was reported to have said: "We are asking ourselves if things are so different from August and do we actually have to cut rates?"
The pound is still some way off the $2.446 mark it reached in November 1980, but some analysts believe it could threaten those levels if economic conditions in the UK and US continue to diverge.
James Hughes, a currency strategist from CMC Markets, said he believed the market had not yet factored in the likelihood of a further cut in US rates.

Business impact

While the weak dollar is good news for British travellers planning trips to the US in the run-up to Christmas, it makes the reverse trip for Americans much more expensive.
The number of visitors from North America fell in the first six months of 2007.
The strong pound is also inconvenient for British firms exporting goods across the Atlantic.
The EEF manufacturers' organisation said the current exchange rate was making life "more difficult" for some British companies.
But it added: "A strong world economy, a shift away from price-sensitive activities and the fact that their costs are spread across the globe have cushioned UK manufacturers from its worst effect."

3 launches new Skype mobile phone

3 launches new Skype mobile phone

Mobile phone provider 3 has launched a new handset that will allow users to make free calls over the internet via telephony service Skype.

Users will also be able to use Skype's instant messaging service, 3 said.
But while people using Skype on their computers are able to make cheap global calls to any phone number, this will not be possible via the new 3 handset.
Skype has about 246 million registered users worldwide and is one of the firms reshaping the global phone industry.

Mobile potential
To date, mobile phone companies have been unwilling to let users freely access Skype via their handsets for fear that it would hurt their business.
While it is possible to access Skype from a number of handsets, this has involved downloading third-party software, something that has put off the majority of users.
The Skype-phone will be the first instance of a phone operator launching a mass market device that is designed to allow free calling over the internet from a mobile, 3 said.
"It takes an innovative operator... to challenge traditional thinking and offer the kind of product other operators are still shying away from," said Skype's acting chief executive, Michael van Swaaij.
"It's is now truly mobile. Skype has now taken a giant step forward in the mobile arena.
And chief executive of 3 UK, Kevin Russell, said the firm wanted to make mobile internet more accessible.
"Services need to be simple to access and affordable," he said.
"Mobile has the potential to massively increase access to internet calling."

Global reach
The service, launching on 2 November, will be accessed by a button on the handset.
As well as the UK, the 3 Skype-phone will be launched in countries including Australia, Denmark, Italy and Hong Kong.
Pay as you go customers will have to top up their account with at least £10 each month to qualify for the free Skype-to-Skype calls, 3 said.

Shop probe 'to shake up planning'

Shop probe 'to shake up planning'

A competition watchdog will clamp down on any of the big four UK supermarkets being too dominant in any local area, reports suggest.

The Competition Commission will this week publish initial findings of its 18-month probe into Tesco, Asda, Sainsbury's and Morrisons.
The watchdog is expected to outline key findings and actions it will take.
It may propose scrapping measures that make it harder for firms to move to an area where they don't have a presence.
Currently a new entrant to a local market must prove that an area requires a new supermarket - a policy seen to favour chains that are already established there.

New suitor 'preparing Rock bid'

New suitor 'preparing Rock bid'

A third potential suitor for the Northern Rock is looking at the beleaguered bank's books ahead of a possible takeover offer, a report says.

Private equity company Cerberus is putting together a bid for the bank, the Sunday Times has reported.
It is being backed by GMAC, the finance firm half owned by General Motors.
A consortium led by Richard Branson's Virgin Group and the US private equity firm JC Flowers are also keen on buying Northern Rock.

Treasury preference

The report says that GMAC, in which Cerberus owns a 51% stake, would play a pivotal role in a move for the bank.
Formed 88 years ago to offer finance for people buying cars, it evolved into a lender of other loans as well as a bank and insurance company.
Observers say that its involvement would make a Cerberus offer appeal more to the Treasury, which is keen to see the Northern Rock sold in a trade deal to another bank, rather than to a firm interested only in the financial aspects of the deal.
The Virgin-led consortium, also featuring US insurance company AIG and the Tosca hedge fund, has offered to buy a majority stake in the bank and inject "hundreds of millions of pounds" of money in exchange for taking control and rebranding the business as Virgin Money.
And last week JC Flowers stepped up its efforts to take control of the bank - putting together a management team in case a deal happens.
It includes former Marks and Spencer chairman Paul Myners as chairman of the bank and former Alliance and Leicester chief executive Richard Pym.
There have been reports that JC Flowers has secured £15bn to buy Northern Rock, the first major UK bank to be brought to its knees by the seizures in the credit markets which followed the crisis affecting US sub-prime home loans.
But according to The Sunday Telegraph, it wants the government to indemnify the bank against any litigation from shareholders, before it agrees to a deal.
Northern Rock's shares are still more than two-thirds below their price before the bank was forced to go to the Bank of England for emergency funding on 14 September.

SAS grounds planes in safety fear

SAS grounds planes in safety fear

Scandinavian airline SAS is to permanently stop flying Bombardier Dash 8 Q400 planes after several emergencies caused by landing gear problems.

The decision came after a plane carrying 44 people from Bergen, Norway, to Copenhagen made an emergency landing in Denmark on Saturday.
Nobody was seriously injured in the incident, the third involving an SAS Bombardier Q400 in two months.
The SAS board decided to "immediately discontinue" using the planes.
"Confidence in the Q400 has diminished considerably and our customers are becoming increasingly doubtful about flying in this type of aircraft," said chief executive Mats Jansson.
And the airline's deputy chief executive, John Dueholm, said the Dash 8-Q400 had seen "repeated quality-related problems".
"SAS's flight operations have always enjoyed an excellent reputation and there is a risk that use of the Dash 8-400 could eventually damage the SAS brand," he said.