Pound hits 21-month low against dollar

LONDON (Reuters) - The pound hit a 21-month low against a broadly buoyant dollar on Friday, as investors took a warning on slowing euro zone growth as a signal to pick up the greenback against a host of currencies.

Sterling tumbled as low as $1.9146, its lowest since November 2006, and was en route to its worst weekly performance in percentage terms in roughly three years, as investors dumped the pound against the dollar as the economy struggles.

The dollar tore higher against most currencies on Friday, boosted after European Central Bank President Jean-Claude Trichet on Thursday followed up a decision to hold interest rates at 4.25 percent by saying that growth in mid-2008 would be substantially weaker than at the start of the year.

Analysts said that Trichet's remarks helped to fuel speculation that the weakness confirmed in the U.S. economy is now spreading to other countries.

"There is growing concern about the euro zone economic backdrop. For so long the focus has been on the Fed and the dollar and the euro has been the default beneficiary," said Neil Mellor, currency strategist at Bank of New York Mellon.

"The concern is there, and sterling has gone down hand in hand with euro/dollar."

Broad weakness in the economy prompted the Bank of England to hold interest rates at 5 percent on Thursday, a decision widely expected given recent data showing falling house prices, rising unemployment and limited growth.

By 3:33 p.m., the pound was down 1.3 percent at $1.9185, having posted its biggest one-day fall in percentage terms since December.

The currency has tumbled roughly 3 percent so far this week, its biggest drop since mid-2005. It has crashed from a 3 1/2-month high of $2.0153 hit only three weeks ago.