Pound hits 26-year high as dollar plummets

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The pound hit its highest level for 26 years earlier today after concerns surrounding the US sub-prime housing market saw the dollar plummet to a 12-year low.

Sterling leapt to $2.05 fuelled by renewed expectations of higher UK interest rates after stronger than expected inflation data emerged yesterday. It has reinforced predictions the Bank of England would increase interest rates to 6% as early as next month, and came as the Bank prepared to release the minutes of the latest meeting held by its rate-setting Monetary Policy Committee. The euro also benefited from renewed weakness in the dollar, rising as high as $1.3823 on EBS, the electronic currency trading platform. Ian Kernohan, economist at RLAM, says he expects the economy to slow but...

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