02.06.2008 15:13

European session: pound fell vs other rivals

The British pound tumbled on speculation credit losses at banks are deepening, slowing growth and preventing policy makers from raising interest rates to fight inflation. The yen gained versus the euro and the dollar.

The pound dropped the most in four weeks versus the dollar after Bradford & Bingley Plc, the U.K.'s biggest mortgage lender to landlords, said it will raise more capital because of widening bad-debt provisions. The yen rose as stocks declined, eroding demand for higher-yielding currencies funded by purchases of the Japanese currency.

The euro reversed declines versus the dollar after European Central Bank council member Miguel Angel Fernandez Ordonez wrote in an editorial in Spain's El Pais newspaper that policy makers are committed to combating inflation.
The dollar snapped a five-day rally against the yen on speculation an industry report today will show U.S. manufacturing contracted for a fourth month. The Institute for Supply Management's factory index, due at 1400GMT, fell to 48.5 in May from 48.6 in the previous month, according to a separate survey. That would be the fourth month below 50, indicating a contraction. U.S. nonfarm payrolls declined for a fifth month in May by 60,000 workers, according to a separate survey conducted before the Labor Department's June 6 report. Futures on the Chicago Board of Trade on May 30 showed a 98 percent chance the Federal Reserve will keep its target rate at 2 percent when it meets next on June 25. That compares with 90 percent odds a week earlier. Pension funds, mutual funds and insurance companies bought more dollars than they've sold this year, according to State Street Corp. and Bank of New York Mellon Corp., the largest money managers for institutions.