Pound, euro weaken on bailouts

Story link: Pound, euro weaken on bailouts

The pound and the euro both saw declines Monday after governments had to bail out more than one bank in order to avoid collapse.

The UK treasury took over mortgage lender Bradford & Bingley (LSE: BB), making it the second UK bank to be nationalized after Northern Rock (LSE: NRK) was taken over in February, in addition to the emergency sale of HBOS (LSE: HBOS) to Lloyds TSB (LSE: LLOY) earlier in September.

Bradford & Bingley’s branches and deposits will be bought by Spain’s Banco Santander (IBEX-35: SAN; LSE: BNC; NYSE: STD).

Meanwhile, Belgian bank Fortis (EuronextAMS: FOR A; Euronext FORB; LuxSE: FOR) was bailed out by Belgium, the Netherlands and Luxembourg after it spent too much on its purchase of ABN Amro (Euronext: AAB; NYSE: ABN) last year and on credit write downs.

Additionally, commercial-property lender Hypo Real Estate (FWB: HRX) received a €35 billion loan guarantee in order to avoid bankruptcy.

Also hurting the pound was new data showing that UK mortgage approvals were down again in August as just 32,000 loans were approved for home purchases, 1,000 fewer than were approved in July, while UK house prices also fell again in September.

At just before noon in New York, the pound was worth $1.8060 and it took ¥189.5809 to buy a pound while it took $1.4403 or ¥151.1883 to buy a euro.

The bailouts pushed sentiment toward expectations that both the European Central Bank and the Bank of England will have to cut interest rates sooner rather than later.

Both the Australia and New Zealand dollars weakened versus the dollar and the yen after US legislators agreed on a bailout package to be presented to the full US House of Representatives and Senate, with a House vote coming as soon as this afternoon in Washington, DC.

It took 82.51 cents US to buy an Australian dollar and 72.53 cents US to buy a New Zealand dollar, while the yen traded at ¥85.4876 to the Aussie and at ¥71.390 to the kiwi.