Dollar Tumbles As Pound Rallies

The dollar fell sharply Tuesday and the pound rallied after Britain’s new Labor government increased interest rates and a senior Bundesbank official said the U.S. currency was overvalued.

The remarks by Ernst Welteke, a member of the Bundesbank’s policy-making council, surprised the market and had more impact on the dollar than the news from Britain, where Chancellor of the Exchequer Gordon Brown not only raised base rates a quarter percentage point to 6.25 percent but gave the Bank of England more independence. Higher rates tend to enhance a currency’s value.

Exchange Currency in Dollars Dollar in foreign currency Canada .7256 1.3782 France .1721 5.8095 Germany .5805 1.7228 Great Britain 1.6337 .6121 Italy .000587 1705.00 Japan .007974 125.40 Mexico .126711 7.8920