Pound Falls Against Euro, Dollar on British Bank Rescue Plan

By Gavin Finch

Jan. 19 (Bloomberg) -- The pound fell against the euro and the dollar after British Chancellor of the Exchequer Alistair Darling announced the second bank rescue in three months.

The government will extend a Bank of England program to inject money into the financial system and also proposed insurance to underwrite mortgage-backed debt and toxic assets, it said in a statement today.

The U.K. currency weakened 0.5 percent to 90.48 pence per euro as of 7:46 a.m. in London. Against the dollar, the pound declined 0.3 percent to $1.4690.

The new measures would add at least 100 billion pounds ($147 billion) to the 250 billion pounds committed by Prime Minister Gordon Brown in October to underwrite a financial system choked with bad debt and reeling from the first recession in two decades. U.K. house prices fell for a third month in January as rising unemployment forced the property market to weaken at a “worrying” pace, Rightmove Plc said today.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net