The pound was lower after this morning's announcement by the Bank of England of an exceptional fine-tuning open market operation designed to calm short-term money markets.

The auction, which was at 11.00 am GMT, was of 5 bln stg via a three-day repo. It received total bids of 23.6 bln stg, leaving the percentage of bids allocated at 21.19 pct.

The extra reserves will mature on Thursday, when the BoE's regular weekly open market operations are held.

The BoE said it is closely monitoring market conditions along with other central banks.

At 11.26 am, the euro was trading at 0.7874 against the pound, up from 0.7826 prior to the earlier BoE statement at 10.00 am announcing the forthcoming tender, while the pound slumped to a 6-day low of 2.0023 against the dollar from 2.0128 usd previously.

The news increased jitters in sterling markets, with the pound already vulnerable after news over the weekend of the takeover of Bear Stearns (NYSE:BSC) by JP Morgan and the Federal Reserve's discount rate cut due to the UK economy's hefty reliance on the financial sector.

'Sterling, one of few currencies to fall against the beleaguered dollar overnight, has weakened further. One reason is that today's BoE actions highlight the extent to which the UK is vulnerable to the dislocations in credit markets,' said Philip Shaw at Investec.

The thinking is that if technical measures to reintroduce liquidity to markets fail to have the desired effect, the Bank of England may be prompted to cut interest rates more aggressively, he said.

-cnn

__________________
Submissions | Hip-Hop 4 Obama