The British pound was under pressure on Thursday after Standard & Poor's cut its U.K. credit-rating outlook, sending the recently high-flying currency in the opposite direction.
The British pound fell as low as $1.5515, from $1.5736 on Wednesday, following the move by Standard & Poor's to lower the credit-rating outlook on the U.K. See S&P story.
The rating agency shook markets on the decision to put Britain's AAA credit rating under threat. The S&P decision came as the British pound this week has rallied to yearly highs as equity markets have rallied from March lows and the financial system has been perceived to be on safer footing. See S&P story.
The U.K. economy is one of the most sensitive of leading industrialized nations to the financial services industry.
"I think the fact [the S&P move] came alongside a very, very sharp rally in the pound makes the move more exaggerated," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London.
"My own view on sterling is that it will be a painful currency to hold," he said, saying the pound is particularly susceptible to declines against currencies such as the euro, the Norwegian krone, or the Australian dollar, where the issuing countries don't have the same levels of fiscal imbalances.
However, news that a 5 billion pound sale of U.K. government debt was successful helped the U.K. currency move off lows.
The U.S. dollar was trading in a tight range to other rivals after recent greenback weakness.
The dollar rose to 94.99 yen from 94.82 yen, while the euro rose to $1.3780 from $1.3763.
The dollar index (DXY 81.18, +0.20, +0.24%) , which measures the greenback against a variety of currencies, rose 0.1% to 81.19.
Data on weekly jobless claims, April leading indicators and a May poll of Philadelphia-area manufacturers will be released later.
