Pound sterling loses momentum |
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| Finance | |
| Written by Gary Howes | |
| Wednesday, 24 June 2009 | |
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The recent good run of the pound has been halted over the past couple of days for a number of reasons. Yesterday saw the sterling edge lower against the dollar and lose heavily against the euro as a degree of risk aversion returns to the currency market. The poor run on the equity markets as of late has indicated investors are starting to shy away from risk again - a category that the sterling falls into.The sterling wasn't helped either by comments by The Bank of England's Chief Economist, Spencer Dale, who commented that the relative weakness of sterling was making UK assets more attractive to foreign investors and the exchange rate was a "key channel" to helping economic growth. This has been seen as an indirect attempt to shift sterling lower after its recent spate of strength. Meanwhile the dollar fell sharply against major currencies on Tuesday as investors awaited the outcome of Federal Reserve’s two-day meeting. Uncertainty over the results of the Fed’s policy meeting on Wednesday and in particular whether it pours cold water on speculation of an interest rate rise, put the greenback under pressure. Traders will also be keen to hear what it says about its debt-buying programme and the economic outlook. The dollar index, which measures the currency against six others, fell to 79.810 from 80.784 in late Monday trading. The dollar was down 0.4% against the yen 95.50 yen. There were also nerves ahead of a US Treasury auction of $40bn in two-year government bonds. The auction received strong demand and focus is now on Wednesday’s auction of $37bn in five-year notes. A further auction of $27bn in seven-year notes is scheduled Thursday.
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