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Sterling dips as UK subprime lender collapses
Tue Sep 11, 2007 8:52 AM BST
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LONDON, Sept 11 (Reuters) - The pound slipped versus the yen, euro and dollar on Tuesday as the collapse of a British subprime lender led investors to fear that problems in the U.S. mortgage market could spread to Britain.

British subprime specialist Victoria Mortgages said it had gone into administration on Monday as the increased cost of borrowing made it unable to fund new loans [nL10796349]. Industry experts say it is the first British lender to go into administration in the current crisis.

Analysts said that the company's demise is prompting fears that Britain could be more exposed to the subprime mortgage problems than was thought.

"This is the first UK casualty from the subprime contagion and it's hitting sterling a little," said Daragh Maher, currency strategist at Calyon. "It shows that although subprime mortgages are a U.S. issue, it has international implications."


At 0722 GMT, sterling was down 0.25 percent versus the yen at 229.78 <GBPJPY=R>. It was down 0.15 percent versus the dollar at $2.0241 <GBP=>. The euro was up 0.1 percent to 68.10 pence <EURGBP=>.

Investors will look to trade data for July at 0830 GMT for further clues on the health of the British economy and prospects for interest rate hikes. Economists polled by Reuters predicted a 6.4 billion pound global goods deficit.

Investors will also look to comments from Federal Reserve Chairman Ben Bernanke at 1500 GMT and European Central Bank President Jean-Claude Trichet at 1600 GMT for clues on the outlook for U.S. and euro zone interest rates.