December 5th 2006
British Pound may harm economy
As the British Pound hovers around a 14-year high against the USD, economists have begun to assess the implications. The most obvious consequence is that UK exports will become less attractive to buyers in the US, which is one of Britain’s primary export markets. Along the same lines, British people may begin funneling some of their consumption and investment dollars into the US to take advantage of comparatively lower prices in the US. Many analysts are predicting that this sudden inflow of British capital into the US will halt the decline of the USD against the Pound. The savviest investors have already begun to lock in the current exchange rate to hedge against a reversal. The Finance Daily reports:
“Forward contracts are a great way for people looking to move to the US to take advantage of the favourable exchange rate.” In essence, a ‘forward contract’ means that you can buy the currency now and pay for it later.
Read More: Mixed Benefits to Strong Pound Stateside