Tuesday, March 16, 2010

Pound Sterling is Sick as a Dog

Today, the HELP for Haiti Fund collected RM17, and our total collection so far since we started this HELP campaign in Klang stands at RM1,388. For those who have not contributed their loose change (i.e. ringgit notes), please do so! For those who have contributed but not in the last 24 hours, please help to deposit a ringgit or two (or if you’re feeling generous, say, RM5 or RM10)! We are deeply grateful to you for giving a thought to the Haitians – thank you very much!

The British pound sterling is in quite bad shape. Seemingly, this currency has lost 6.2% this year on speculation a budget gap will skewer the currency: Either record borrowing will push debt costs higher and force policymakers to print more money to buy bonds, or lawmakers will cut spending too fast and trigger a new recession.

This concern is very real! Consider this! Firstly, Prime Minister Gordon Brown’s government estimates the deficit will hit 12.6% of GDP, almost as high as the 12.7% in Greece that drove European leaders to consider a bailout. Secondly, the pound is the only one of 16 most-traded currencies tracked by Bloomberg to weaken over the past six months against the euro.

Mansoor Mohi-uddin, Singapore-based strategist at UBS AG, the world’s second largest currency trader, said: “…In a worst case scenario, the currency would fall to parity with the euro and to US$1.05, the lowest level since 1985 (Star, March 16, 2010, p B9). I don’t think the pound will suffer this fate, but it is volatile. I should start buying pound sterling now, don’t you think?

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