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Sterling slips as King remarks on benefits of a weak pound...

STERLING slumped against most foreign currencies yesterday, as forex traders took in Bank of England governor Mervyn King&rsquo;s indication that he was comfortable with a weaker pound by selling it.<br /><br />Currency markets reacted to comments from King suggesting that a weaker sterling could help the UK recalibrate its economy, driving the pound to a five-month low of &euro;1.09 against the euro and $1.60 against the dollar.<br /><br />&ldquo;The fall in the exchange rate that we have seen will be helpful, but there&rsquo;s no doubt that we need to see a shift of resources into net exports that compete with imports and help to reduce the trade deficit,&rdquo; said King. <br /><br />Ashraf Laidi, currency analyst at CMC Markets, said King&rsquo;s statement had piled yet more pressure on sterling in the wake of a series of blows to the pound.<br /><br />In a note branding the pound as a &ldquo;lose-lose currency&rdquo;, he said hints by King at negative interest rates, as well as Lloyds&rsquo; failed bid to exit the government&rsquo;s asset protection scheme last&nbsp; week, had dented sterling.<br /><br />The pound was further hit by the latest Bank minutes suggesting that improved economic conditions could be a &ldquo;false dawn&rdquo;, he said.<br /><br />And he pointed to the longer term impact of the Bank considering increasing quantitative easing, even as the US Federal Reserve begins to talk exit strategies and the European Central Bank opts for a more a cautious approach to stimuli.<br /><br />Coupled with King&rsquo;s comments yesterday, he said currency traders had been left with &ldquo;little choice but to sell the pound&rdquo;.