Pound Tumbles as Britain Seen Leaning Toward Euro

Rising expectations that Britain will speed up its adoption of Europe’s 12-nation common currency are hammering the pound, which Wednesday set a 15-year low against the dollar.

The pound’s slump is making visits there cheaper for U.S. tourists, but it is slashing the value of British stocks held by Americans.

The pound fell below $1.39 in New York on Wednesday, down from $1.41 on Tuesday and the weakest since 1986.

Polls suggest Prime Minister Tony Blair’s party will win the nation’s election today, which will give him the option of holding a referendum on replacing the pound with the euro early in the next term, analysts said.

The pound would have to weaken before the conversion, to ensure the competitiveness of British exports, many investors have said.

Blair has said he favors linking with the euro region “in principle.” He is reported to favor a referendum in autumn 2002, whereas Chancellor Gordon Brown wants to delay until 2003, the Independent newspaper reported, citing unidentified “close allies.”

The pound tumbled Wednesday after an article in the Independent suggested Blair is planning to “kick-start” a debate on Britain’s future in Europe as soon as September, analysts said.

The pound’s weakness this year has deepened losses for American investors in Britain. In pound terms, British stocks are down 5% this year. But when translated to dollars, the decline is 11.6%.

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Taking a Pounding

The value of Britain’s pound fell to a 15-year low Wednesday on expectations that a sweeping election victory by Prime Minister Tony Blair could speed up the country’s adoption of the euro currency. Source: Bloomberg News