The pound declined on Monday after the UK government announced a plan to temporarily nationalize struggling bank Northern Rock, leading investors to grow more concerned about the country s economy.
Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling said in a press conference today the move would be the best option for taxpayers after a pair of private sector bids were deemed insufficient. The UK gave the bank an emergency loan of 25 billion in September to prevent it from going under.
Meanwhile, Tim Besley, a member of the Bank of England's Monetary Policy Committee painted a darker picture for the economy in the near futures.
With credit conditions tightening, we might expect a significant reduction in consumption growth over the coming months, he said.
The pound fell to $1.9496 at 2:24 p.m. EST from $1.9612 late Friday.
The euro also fell against the dollar after Christian Noyer, governor of the Bank of France and Governing Council Member to the European Central Bank, said on Sunday that economic growth in the euro zone for 2008 could be weaker than anticipated.
The euro fell to $1.4659 from $1.4682 on Friday. Meanwhile, the yen fell against the dollar, trading at 108.19 versus the US currency.