Sterling gained versus a broadly weaker dollar on Friday as jitters about the health of the US financial sector overshadowed poor sentiment on Britain's economy. The Bank of England, struggling to balance an unhealthy mix of rising inflation and slowing growth, kept rates steady at 5 percent on Thursday.
The slump in Britain's housing market could cost up to 100,000 jobs according to the National Federation of Builders. However for Friday at least, worries about the health of the UK economy were overshadowed by jitters over the US financial sector, which hit US stocks and dragged the dollar down versus all majors, including sterling.
"If you look across the board it's a dollar story. There's an intensification of concerns about financial institutions, so we're seeing the dollar perform badly across the board," said Derek Halpenny, senior currency economist at BTM UFJ.
The dollar took more punishment after Treasury Secretary Henry Paulson gave no indication of an imminent bail-out of US mortgage agencies Fannie Mae and Freddie Mac after renewed concerns surfaced about their financial position. By 1407 GMT the pound was up 0.7 percent at $1.9918, having earlier hit a 1-1/2 week high of $1.9959. The euro was steady at 79.80 pence, off an earlier one-month high of 80.04 pence.
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