LONDON: Sterling rose to six-week high against the euro and a one-month peak on a trade-weighted basis on Monday, bolstered by expectations that Britons would vote to stay in the European Union after U.S. President Barack Obama waded into the debate.
Sterling gained 0.4 percent against the dollar to $1.4460 and hit a six-week high against the euro of 77.52 pence per euro in early Asian trade. The broader sterling trade-weighted index was at 86.2, well above a 28-month low of 83.3 hit on April 7.
In the currency options market too, the bias towards sterling weakness against the euro over the next month was at its lowest since early February, indicating more relief in store for the pound.
Last week was sterling's best against the common currency since early March as odds swung in favour of the campaign to stay in the EU. From 37 percent on Thursday, the chances of Britain voting to leave the EU in the June 23 referendum fell to around 26 percent on Monday, according to the Betfair betting exchange.
Data from Betfair showed the odds of Britain staying in the EU surged to their highest since September last year.
Bookmaker Ladbrokes also reported a shift in betting towards the "Remain" campaign and a number of opinion polls indicated that those in favour of staying in the Union were edging ahead.
"The lower Brexit odds are pushing sterling higher with short bets against the pound, especially against the yen, being cut," said John Hardy, currency strategist at Saxo Bank.
Sterling traded near its highest in a month against the safe-haven yen at 160.50 on Monday, recovering 6.8 percent from a 2-1/2 year low of 151.66 yen struck on April 7.
Traders said Obama's appeal for Britain to remain in the 28-nation bloc was broadly helping sentiment as it underlined the weight of argument in recent weeks from global and financial leaders in favour of staying.
"The might of Obama's public relations has helped sterling reach highs against the euro, as odds swing against the Brexit campaign," said Tobais Davis, head of corporate treasury sales at Western Union.
"Obama's support for (Prime Minister David) Cameron and his comments alluding to trade deals taking close to a decade to reach caused upset in the exit camp, but gave the currency a boost."
Obama said on Sunday that Britain could have to wait a decade for a free trade deal with the United States if it votes to leave the EU. He spent the bulk of his visit to London late last week urging Britons to stay, adding that leaving would be a mistake.
Trade-weighted sterling has fallen 8.7 percent since the referendum began to filter into market pricing in late November and some major banks warned of a crisis for sterling that would drive it to as low as $1.20 if Britain votes to leave.
Investors worry that a current account deficit of 7 percent of national output leaves Britain very dependent on foreign inflows, with buyers of UK assets spooked by a possible British exit.
Indeed, speculators have increased short positions on sterling to the highest level in nearly three years in the week to last Tuesday.
Comments
Comments are closed for this article.