LONDON (Bloomberg) — The UK pound declined for a seventh week against the dollar after the Bank of England kept interest rates on hold, likely delaying a recovery in Europe's second-biggest economy.

The pound was also dropped for a fourth week versus the euro after the nine-member Monetary Policy Committee kept the benchmark rate at five percent on September 4, matching the forecast of all 61 economists surveyed by Bloomberg News. Policy makers, led by Governor Mervyn King, are trying to balance the risk of a recession with the fastest inflation in more than a decade.

"Sterling is really seen as the currency-market dog, if you like, being seen to be sold for any reason you can possibly think of," said Jeremy Stretch, senior strategist in London at Rabobank International, the third-largest Dutch bank. "It's difficult to find too many ways to be positive about sterling."

The pound fell as low as $1.7538 on Friday in London, the lowest level since April 2006, from $1.8211 on August 29. It dropped 2.6 percent on the week, extending the longest losing streak since June 2005. It was at 80.63 pence per euro, from 80.58 pence a week ago. It fell to 81.88 pence on September 4, the weakest since the single European currency's debut in 1999.

The UK currency's trade-weighted index, a gauge of the currency's performance against Britain's major trade partners, has slumped almost 10 percent this year and was at 85.29 yesterday, according to Deutsche Bank AG. The measure slumped to the lowest level since at least 2000 the day before.

The pound weakened as reports showed the economic slowdown is deepening and HBOS Plc said last week house prices declined for a fifth month in August.

UBS AG lowered its forecasts for the UK economy, predicting it will slip into a recession in the second half of this year. The Bank of England will reduce the main interest by one percentage point next year, while the pound may trade as low as $1.68 in the next 12 months, UBS economist Amit Kara wrote in a note e-mailed to investors yesterday.

Property values will slip as much as 35 percent from their peak last year, leaving as many as 1.3 million British households with mortgages worth more than their property, analysts at Sanford C. Bernstein & Co. said. The number of houses with so-called negative equity may trigger as much as £38 billion ($67 billion) in losses for banks and customers, Bernstein analysts led by Bruno Paulson wrote in a client note on Friday.

The London-based central bank is seeking to bring inflation, which quickened to 4.4 percent in July, below its two percent target. It has cut the benchmark rate three times since the end of November.

The dollar was mostly higher on Friday despite bad news about US jobs. Grim outlooks on the European economies and oil's continued drop supported the buck.

The 15-nation euro fell to $1.4243 in late New York trading on Friday from $1.4331 late Thursday. Earlier, in European trading, the euro touched as low as $1.4914, a level unseen since October 2007. The dollar has gained more than four cents against the euro this week, or three percent. That's the biggest weekly gain this year, according to Thomson Reuters.

The Labor Department reported on Friday that the unemployment rate climbed to 6.1 percent in August on top of 84,000 job cuts, from 5.7 percent in July. The rate is now at a five-year high.