RTTNews - Friday, the pound extended its yesterday's downtrend against other major currencies as the Royal Bank of Scotland posted losses during the first half of 2009 and said it anticipated tough times in the next two years.
The pound slumped to a 9-day low against the euro, 8-day low against the franc and a 4-day low against the dollar and the yen.
The Royal Bank of Scotland posted a wider first-half net loss, as bad debts jumped to 7.5 billion pounds ($12.6 billion) and sluggish activity in its retail and corporate businesses wiped out strong gains in investment banking.
Shares in RBS, in which the taxpayer holds a 70 percent stake after a government bailout last year, plummeted 13.7 percent as Chief Executive Stephen Hester warned that overall results may not substantially improve until 2011 and full recovery will take time.
RBS reported a net loss of 1.04 billion pounds ($1.7 billion) in the first half, compared with a loss of 827 million pounds a year ago.
Revenue rose 58 percent to 21.84 billion pounds, from 13.84 billion pounds a year ago.
A surprise announcement by the Bank of England yesterday that it will pump more funds into the banking system kept the pound under heavy selling pressure, pulling it away from a 9 1/2-month high against the dollar hit earlier in the week.
The Bank of England decided to raise the size of the bond purchase programme using the central bank reserves to GBP 175 billion from GBP 125 billion. The central bank had started buying assets using central bank reserves in March and increased its size of the scheme to GBP 125 billion in May.
As widely expected, the BoE left its benchmark interest rate unchanged at a record low of 0.5%.
Britain's top share index fell in early trade today, dragged lower by banks after Royal Bank of Scotland's poor first-half results, and with investors bracing themselves ahead of the latest U.S. jobs report.
At 6:31 am ET, the FTSE 100 index was down 52.29 points, or 1.12 percent, at 4,638.20.
In economic news, the Office for National Statistics said U.K.'s producer output prices rose 0.3 percent on month and fell 1.3 percent on year in July.
Due to a fall in the prices of crude oil, input prices were down 1.4% month-on-month and 12.2% annually. Input prices dropped more than the expected 0.8% monthly fall and an anticipated 10.9% annual decrease.
The pound, which closed yesterday's trading at 1.6775 against the dollar fell to a 4-day low of 1.6721 during early deals on Friday. The next downside target level for the pound-dollar pair is seen at 1.656.
After hitting a 23- 1/2 -year low of 1.3507 on January 23, the U.K. currency gained 21% against the dollar and reached a 9 1/2 -month high of 1.7045 on August 05 as a rally in stock markets, interest rate cut and stimulus packages by central banks and some encouraging economic reports around the world lifted the pound.
But the pound plunged yesterday after the Bank of England surprised markets by expanding its quantitative easing program. Thus far, the pound-dollar pair has lost 2% from a 9 1/2 -month high.
In early trading on Friday, the pound slipped to a 4-day low of 159.01 against the yen. This may be compared to yesterday's close of 160.10. If the pound-yen pair weakens further, it may likely target the 157 level.
The U.K. currency has declined more than 2% against the yen since it reached an 8-week high of 162.49 on Wednesday.
Against the Swiss franc, the pound plunged to an 8-day low of 1.7802 in early deals on Friday. On the downside, 1.760 is seen as the next target level for the pound.
The franc rose today despite a report from Switzerland showed that the unemployment rate rose to 3.7% in July from 3.6% in June. That was in line with economists' expectations.
Encouraging U.K. economic reports released earlier this week helped pound to hit a 6-week high of 1.8098 against the franc yesterday, up 1.3% from last week's close. But the pound pared its gains amid the BoE announcement and declined 2% thus far.
In early deals on Friday, the pound plummeted to a 9-day low of 0.8596 against the euro. The next downside target level for the pound is seen at 0.865. The euro-pound pair closed
yesterday's New York session at 0.8556.
The euro rose as the German exports in June registered the biggest monthly growth since September 2006 on rising global demand after business surveys revealed optimism in economic activity.
According to a Destatis report, exports jumped 7% month-on-month in June, much larger than the revised 0.2% rise seen in May and 0.9% expected by economists. Meanwhile, imports grew 6.8%, reversing May's revised 1.9% drop. Economists were looking for a monthly growth of 0.7% in imports.
The pound has dropped 1.6% against the euro after it reached a 5-week high of 0.8458 yesterday.
Looking ahead, all eyes will be on the U.S. Labor Department's monthly non-farm payroll report, which is due at 8:30 am ET. Economists estimate that the U.S. economy lost 325,000 jobs in July and look for an unemployment rate of 9.6%.
The U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 pm ET. Consumer credit for June is likely to show a decline of $5 billion.
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