The pound fell to a record low against the yen for a second day and declined to the weakest level versus the dollar since 2001 on speculation the British government will nationalize banks. Sterling dropped for a fourth day against the euro after Bank of England Governor Mervyn King said in a speech yesterday that the central bank may start buying assets within weeks after cutting the main rate to the lowest level since 1694. The dollar fell to a one-month low versus the yen as some traders quit buying the greenback after options expired. “The U.K.’s imploding,” said Jonathan Gencher, Toronto- based director of currency sales at BMO Capital Markets, a unit of Canada’s fourth-largest bank. “You have all the concern about the financial sector and which banks are going to be nationalized. You have expectations that the Bank of England is going to be moving toward zero interest rates. That’s weighing on the pound.” The pound fell 2.7 percent to 121.71 yen at 10:49 a.m. in New York, from 125.01 yen yesterday. It reached an all-time low of 120.94 yen. Sterling dropped 1 percent to $1.3789 from $1.3928 and touched $1.3716, the lowest level since June 2001. The dollar declined 1.7 percent to 88.19 yen and touched 87.92, the lowest level since Dec. 18, after earlier increasing 0.5 percent. The euro decreased 1.8 percent to 113.75 yen. Weaker Sterling Sterling lost 6.2 percent versus the dollar and 3.6 percent against the euro in three days after the U.K. government’s plan for a second bank bailout in three months raised concern the financial crisis is deepening. Shares of Barclays Plc fell for a seventh day in London today on speculation the bank may take more writedowns and be nationalized. The pound depreciated 1.1 percent to 93.68 pence against the euro from 92.62 after breaching 94 pence for the first time since Jan. 5. The euro traded at $1.2905, compared with $1.2904. Canada’s currency gained 0.1 percent to C$1.2668 per U.S. dollar as crude oil for March delivery advanced as much as 2.8 percent to $41.99 a barrel in New York. Crude generates about a tenth of Canada’s export revenue. Norway’s krone rose 1.7 percent to 9.0371 per euro as crude oil, the country’s biggest export, gained. Sweden’s krona increased for the first time in three days versus the euro, rising 1.5 percent to 10.7284. Goldman Sachs Group Inc. last month named the krone and krona as its top picks for 2009, saying Nordic economies will avoid the worst of the global recession. The krone gained 7 percent versus the euro this month after losing 18 percent last year. The krona advanced 2.6 percent, following a 14 percent drop in 2008. Bank of England The BOE’s Monetary Policy Committee voted 8-1 to trim the main rate by a half-percentage point to 1.5 percent, minutes of the Jan. 8 decision published in London today show. David Blanchflower voted for a full-point interest-rate cut. The central bank may acquire securities such as corporate bonds and commercial paper to bolster lending to companies and consumers, King said in Nottingham, England, late yesterday. King’s “speech hurt the currency as it was more explicit than we expected,” said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London. “The central bank is turning on the printing presses.” The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to a Bloomberg News survey of economists. Dollar Versus Rand The U.S. dollar fell 1.6 percent to 10.09 South African rand and 1.2 percent to 13.86 Mexican peso on speculation President Barack Obama’s bank rescue plan will reduce demand for the greenback as a haven. The Standard & Poor’s 500 Index rose 1.9 percent after falling 5.3 percent yesterday. “The market takes a rest today,” said Sacha Tihanyi, the associate currency strategist at Scotia Capital Inc. in Toronto. “But as long as the bad assets remain on banks’ balance sheets unresolved, we’ll have bouts of risk aversion and strength in the dollar.” The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, was little changed at 86.14 after gaining 1.8 percent yesterday as shares of State Street Corp. and Wells Fargo & Co. boosted the safety demand for the greenback. It has advanced 5.9 percent this year.

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