Why is the Brittish Pound worth twice as much as the U.S. Dollar?

Question

What exactly governs the exchange rate?

Answer 1

Exchange rates are governed primarily by market forces. One of the most influential of those forces are interest rates. US interest rates are very low compared to the rest of the industrialized world. This tends to lower the value of the dollar. Balance of payments issues will also have some influence there as well, and the US balance of payments is in the toilet and has been for a while. That double-whammy has lowered the dollar significantly. It's been on a gradual slide since G W Bush took office.

Answer 2

Since leaving gold, there have been several attempts to peg the value of the pound to other currencies, initially the U.S. dollar.

Under continuing economic pressure, and despite months of denials that it would do so, on September 19, 1949, the government devalued the pound by 30%, from US$4.03 to US$2.80. The move prompted several other governments to devalue against the dollar too, including Australia, Denmark, Ireland, Egypt, India, Israel, New Zealand, Norway and South Africa.

In the mid-1960s the pound came under renewed pressure since the exchange rate against the dollar was considered too high. In the summer of 1966, with the value of the pound falling in the currency markets, exchange controls were tightened by the Wilson government. Among the measures, tourists were banned from taking more than £50 out of the country, until the restriction was lifted in 1970. The pound was eventually devalued by 14.3% to US$2.41 in November 1967.

With the break down of the Bretton Woods system — not least because mainly British currency dealers had created a substantial Eurodollar market which made the U.S. dollar's gold standard harder for its government to maintain — the pound was floated in the early 1970s and so subject to a market valuation. The Sterling Area effectively ended at this time when the majority of its members also chose to float freely against the pound and the dollar.

A further crisis followed in 1976, when it was apparently leaked that the International Monetary Fund (IMF) thought that the pound should be set at US$1.50, and as a result the pound fell to $1.57, and the government decided it had to borrow £2.3 billion from the IMF. In the early 1980s the pound moved above the $2 level as interest rates rose in response to the monetarist policy of targeting money supply and a high exchange rate was widely blamed for the deep recession of 1981. At its lowest, the pound stood at just US$1.05 in February 1985, before returning to US$1.66 during the 1990s. As of August, 2006 it had risen back to $1.91.


That's just a little information. Basically, it all has to go with the economy of the US and of Britian.

Answer 3

One British Pound is worth 1.8747 USD at todays exchange rate..
World Bank.

Answer 4

so many factors. but none of them legit.

the brits don't contribute anything in the way of natural resources and their economy is strictly tourist based.

i've yet to figure that one out myself.

Answer 5

inflation and a bunch of other crap that is hard to explain

Answer 6

its all about economics.... britain is succesful in buisness....