Sterling pounds the dollarThe pound rallies against the dollar

21 May 2009

Holiday money

With a weaker dollar, an iPod nano is cheaper in the US

The pound is worth more against the US dollar than at any time over the past six months. The exchange rate at nine o'clock on 21 May saw £1 worth almost $1.58 - the most favourable rate since early November 2008. 

For travellers heading to the States, this means it's now £47 cheaper to get $500 than it was on 21 January 2009, when the pound was at a low ebb against the dollar, at £1 for $1.37.

Quantitative easing

The pound's recovery is partly due to the effects of the UK and US governments policy of 'printing money' to encourage banks to lend, and so relieve pressure of their respective economies. 

The downside of this policy, known as quantitative easing, is that the value of the home currency is diluted as the economy is flooded with more cash. Right now, the pound is relatively stronger than the dollar because the effects of quantitative easing are being felt on a greater scale in the US than the UK.

Dan Moore, holiday money expert at Which? said: 'As the effects of quantitative easing are felt in the UK the gap between the pound and the US dollar will probably narrow. But for now it's good news for holiday-makers heading over the Atlantic for the Whitsun half term.'

pound coins

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