Reply #52: Sterling heading for $2 barrier [View All]

[54anickel]

http://news.bbc.co.uk/2/hi/business/5250250.stm

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Sterling last reached the $2 mark in September 1992, just before the "Black Wednesday" crisis, when currency speculators forced the UK government to withdraw the pound from the European Exchange Rate Mechanism.

If the pound does pass the $2 mark, currency experts believe it will be a reflection of the dollar's weakness across the globe.

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"Since April there has been more and more comment from Chinese central bank officials about the composition of their reserves," said Mr Derrick.

"There is a definite feeling that they are uncomfortable with their weighting of dollars."

If the Chinese central bank starts selling noticeable amounts of its dollar reserves, it would weaken the dollar even more in the eyes of currency markets.

There are signs that other central banks are seeing sterling as a more attractive option, with the Bank of Italy announcing recently that it had slashed its dollar holdings and moved a quarter of its foreign reserves into the pound.

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