By Paul Gordon and Candice Zachariahs
Jan. 20 (Bloomberg) -- The pound dropped to a record low versus the yen and the weakest level since 2002 against the dollar on concern the government will have to rescue more banks as the economy slips into its worst recession since World War II.
Jim Rogers, chairman of Singapore-based Rogers Holdings, said the “U.K. is finished” and investors should sell the currency. Commonwealth Bank of Australia said there was a high risk of a cut to the country’s credit rating outlook and lowered its pound forecast. Prime Minister Gordon Brown authorized a 100 billion pound ($142 billion) bailout for banks.
“I would urge you to sell any sterling you might have,” said Rogers. “It’s finished. I hate to say it, but I would not put any money in the U.K.” Rogers correctly predicted the start of the commodities rally in 1999.
The pound slid to 127.44 yen, the weakest since at least 1971, as of 2:23 p.m. in Tokyo from 130.71 yen yesterday in London, according to data compiled by Bloomberg. It declined 2 percent to $1.4133, the lowest since March 2002, and last traded at $1.4185. The currency slid 1.1 percent to 91.58 pence per euro.
Rogers said the currency will fall below its record low of $1.0520 reached in February 1985.
Yesterday’s package to stabilize the financial sector comes after October’s 50 billion pound bank recapitalization program, which includes a 250 billion pound bank credit line.
Commonwealth Bank of Australia, the nation’s biggest bank, lowered its forecast for the pound to $1.50 by the end of June from a previous estimate of $1.60.
U.K. debt may now be greater than forecast due to the additional bank bailout plans announced by the government since the publication of the government’s pre-budget report on Nov. 24, wrote Sydney-based Richard Grace, chief currency strategist at Commonwealth Bank in a research report today.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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