Foreign exchange markets – pound plummets to five-year low against dollar

Following comments yesterday from Bank of England Governor, Mervyn King, condemning the UK economy to recession, investors rushed to the traditional US dollar safe-haven despite concerns about the US economy.

[ClickPress, Wed Oct 22 2008] Following comments yesterday from Bank of England Governor, Mervyn King, condemning the UK economy to recession, investors rushed to the traditional US dollar safe-haven despite concerns about the US economy. Overnight the pound fell in value to just over 1.6260, representing a drop in value of over 7% since the start of the week. In late London trading today (22 October) it traded down to 1.6150. The dollar’s strengthening also saw the euro-US dollar exchange rate drop to 1.2740, its lowest for nearly two years.

The pound also took a battering against the euro, dropping to 1.2640, well below the 1.2900 seen at the beginning of the week.

Jonathan Quin, director of the foreign exchange broker World First, said, “It’s a great time for people wanting to convert dollars to sterling. Clients are taking advantage of this dramatic move with some converting funds they’ve been holding onto for five years. Additionally, clients are securing today’s historic dollar rate for future transactions and buying forward contracts to convert dollars they’re due to receive in the future.”

The recent volatility and uncertainty in financial markets has seen foreign exchange rates move dramatically. This has prompted many companies to look to hedge their exposures to avoid exchange rate fluctuations affecting their margins. This has led to a dramatic increase in clients booking foreign exchange option structures. These allow the client to set a worst case rate but benefit from advantageous moves. Alex Sullivan, chief dealer at World First explains, “One particular client hedged his dollar exposure with a worst case rate of 1.8500. So he is still buying dollars at that level and is immune to the recent moves. We really are in a position to help companies maintain their profit margins at this time of doom and gloom.”

For further information contact:

Wendy Casterton, World First, 020 7801 1060, wendy.casterton@worldfirst.com

Notes for editors:

World First is a currency exchange broker, serving both private and corporate clients. Set up in 2004 by directors Jonathan Quin and Nick Robinson, the company is experiencing very fast growth and now employs over 50 people in two offices (London, UK and Hamilton, New Zealand).

World First’s corporate clients are generally import or export companies, making regular transfers. World First helps them minimise their exchange rate risk and manage their currency exposure.

Private clients largely use broker services to purchase a property abroad, usually a second home or investment or to emigrate.

World First is also now offering currency options to SMEs and private clients through World First Markets Ltd, which is authorised and regulated in the UK by the FSA. World First is the first and currently only broker to offer currency options which have, until now, been the preserve of very large corporate organisations through their banks.