Bad HSBC loans frustrate pound

03-09-2009 16:43

Expectations that HSBC, England’s major bank, will face difficulties in managing the US bad loans caused the pound sterling to fall versus all major currencies today. The UK FTSE 100 benchmark index as well as the Japanese Nikkei 225 fell during the early European and late Asian equity market sessions while HSBC dropped by 18 % today. More help from the government will be necessary to recover UK’s financial system.

Pound depreciates on British giveaway policy

Analysts believe that the weak pound is a result of the general equity markets and due to HSBC’s situation. The pound’s depreciation can be explained by the policy of the British government that provides money quite easily to their banks. Normally this giveaway policy is followed by an increase in the monetary base, which results in a currency depreciation.