Over the last few days sterling has fallen dramatically against the yen – from one pound buying 175 yen to only buying 141 yen. The Japanese base rate is 0.5% compared to the UK’s 4.5%.
International investors are leaving sterling. It all goes to show that relatively high interest rates do not necessarily keep a currency up. As someone who wants our interest rates down to help fight recession, I have also always stressed we need to get a better grip on our public finances to instill more confidence. That looks more and more like an obvious necessity from watching the markets.
Today’s market movements are more evidence that the UK authorities have to do more to reassure and to stabilise. The share prices of HBOS and RBS do not make good reading for taxpayers either. At current prices the taxpayer will lose £5 billion on buying the new shares in HBOS and RBS! Why, oh why?