Sterling hits high after UK push to raise interest rates

Published: 24 May, 2011

Sterling hit a two month high against the euro yesterday after Bank of England chief economist Spencer Dale, said its policy makers should increase interest rates to avoid damaging the UK economy.

Currency rates - May 24, 2011

EURO/GBP - 1.1462
US$/GBP - 1.6127
CHF/GBP - 1.4242
CAN$/GBP - 1.5740
AUS$/GBP - 1.5291
ZAR/GBP - 11.280
JPY/GBP - 131.86
HKD/GBP - 12.540
NZD/GBP - 2.0254
SEK/GBP - 10.231
US$/EURO - 1.4073

Sterling benefited from euro weakness, but this increased risk aversion and saw the pound fall by 0.7% against the US dollar to hit a low of $1.6087/£1 as investors cut exposure to riskier assets. One currency analyst did feel that sterling had been oversold against the US dollar, and as such there could be some upside against the US dollar in the coming weeks.

The euro fell broadly yesterday, hitting a two-month low against the US dollar and sterling as concerns grew over a potential restructuring of Greek debt. After a flurry of credit rating downgrades over the last few days, rating agency Fitch yesterday cut its outlook for Belgium to negative. The euro hit a record low against the Swiss franc, with more losses expected on fears that the euro zone debt crisis is getting worse, with doubts over Spain's austerity measures also emerging as the ruling party lost out in key regional elections.

The US dollar rose against all of its 16 most-traded counterparts as the euro slipped below $1.40 for the first time in two months as concerns over a resurgent debt crisis in Europe grew and investors scrambled to put their funds into the safe haven currency of the US dollar. The high yielding 'riskier; Australian dollar was one of the worst performers against the US dollar falling nearly 1.5%.

Elsewhere, other traditionally risky high yielding currencies also declined, with the South African rand dropping by 2% against the US currency and nearly 1% against sterling.

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