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Sterling rises on euro after Carney talk

Monday, August 18 12:39:37

Sterling was the main mover on major currency markets today, recovering from multi-month lows, while the Swiss franc retreated as investors' concerns over Ukraine eased marginally.

The dollar, knocked back last week after a strong run since early July, was roughly steady against the yen and euro and a basket of currencies used to measure its broader strength, hampered by U.S. Treasury yields that were close to 16-month lows.

The pound rose after Bank of England Governor Mark Carney said in a newspaper interview that UK interest rates may have to rise even before real wages pick up, backtracking from comments last week that suggested the opposite and prompted markets to push back bets on a first rate hike.

"The comments in the (Sunday) Times were definitely a surprise to markets and that's what is behind this move this morning," said Adam Myers, head of European FX strategy with Credit Agricole in London.

Sterling has taken a hammering over the past month, hurt by the suspicion that all of the best news on the UK economy has been priced in and that the bank might not be quite as quick as some had expected to raise rates.

After a sixth straight weekly loss against the dollar, it gained around a third of a percent against the euro and the dollar in early European deals, trading at 80.04 pence per euro and $1.6727.

Myers said the week might prove rocky for the dollar after an uncertain performance so far in August. It has failed to build on improvement which had prompted many analysts to predict the greenback was finally on for a longer run higher.

The wait for the annual U.S. meeting of central bankers in Jackson Hole, which starts on Thursday, might help hold off bigger moves this week, Myers said, but there were risks to the dollar particularly against the euro.

"After what was a very exciting July, the market has tried both ways over the past couple of weeks," Myers said.

"The euro tried several times to break out higher last week and was stopped each time around $1.34. I think the danger is we may see that (barrier) broken this week."

The euro last traded at $1.3389, flat on the day and well within the slim $1.3333-$1.3445 range seen so far this month. The dollar bought 102.47 yen, a touch more than Friday, while against a basket of currencies it edged up to 81.453.

For more visit: www.businessworld.ie