Report Rbs - Fix Rate Mortgages Up in House prices and the economy Posted November 3, 2009 By KATIE MARTIN LONDON – The pound tumbled Tuesday on fresh nerves over the health of U.K. banks, while the dollar has lacked direction. The pound fell from $1.6350 as London trading started, to a low of $1.6295. It then extended its fall later as nerves over risk hit global markets again. The euro spiked from the £0.9030 area to a high of £0.9061 before reversing the gains as the single currency fell against the dollar. At the outset of London trading, the U.K. government said it would inject £31.2 billion ($51.16 billion) of new taxpayer money into Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC as part of a revamp of the banking system and the long-awaited asset protection scheme. Both banks disclosed major capital-raising plans to bolster their balance sheets and detailed the divestments they will make to satisfy European Union competition concerns. The news, which had been expected, served as yet another reminder of the fragile state of the U.K.'s banking sector -- a key factor for the pound's movements. And some traders appeared to be unhappy with the banks' divestment plans. "The way it is being done is not to the market's liking," said Geoffrey Yu, a currencies analyst at UBS AG in London. With risky assets across the board under pressure, and with the Bank of England scheduled to set monetary policy on Thursday, that was enough to push the pound lower, he added. Elsewhere the major news came from Australia, where the central bank raised interest rates by a quarter of a percentage point for the second month in a row, taking the key rate to 3.5%. However, in an accompanying statement, the Reserve Bank of Australia dented expectations for a series of further hikes ahead, hinting that a December rise is not guaranteed, partly because of the strength of the Australian dollar. The statement dragged the so-called Aussie down from the USD$0.9080 area to a session low of US$0.8951, particularly as some economists had expected the RBA to produce a half-point rate rise. "All in all, there was absolutely no sense that the RBA will become more aggressive and hike by 50BP any time soon," said Sue Trinh, an analyst at RBC Capital Markets in Sydney. More broadly, the U.S. dollar wasn't showing clear direction, in a quiet session without key data releases. The currency gained sharply against the euro but fell slightly against the yen. Analysts said choppy, directionless moves are likely to persist for now ahead of a string of crucial central bank meetings that lie ahead this week. The U.S. Federal Reserve will announce its latest monetary policy decision Wednesday, followed by the Bank of England and the European Central Bank Thursday. "There is a sense that market participants are waiting for [these meetings] before serious action resumes," said analysts at Brown Brothers Harriman.