Pound hits six-year low

BRITONS chasing the Florida sunshine are finding that the US is getting more expensive by the day.

City analysts do not expect the pound to fall much further this week, after it hit a six-year low on Friday of dollars 1.4866 as the US currency surged on the back of recovery prospects. Sterling is now worth 25 per cent less against the dollar than it was six months ago.

The UK currency was also reacting to the unexpected 1 point cut in bank base rates last week to 6 per cent.

While a lower exchange rate should help UK exports, analysts are worried that it may stimulate inflation by pushing up import costs.

The UK interest rate cut plunged the Irish economy - which is heavily dependent on exports to Britain - into crisis by triggering renewed selling pressure on the punt. The currency fell to its floor in the exchange rate mechanism, prompting fears that it would have to withdraw from the system.

The Irish government was forced to raise interest rates to 28 per cent to prevent devaluation. Irish industrialists warned the newly elected government that the strategy could ruin the economy and cost up to 10,000 jobs. Unemployment is already running at 17 per cent in Ireland.