Sterling rose to its highest in more than 13 months against its currency basket on Tuesday and stayed near a three-month high against the euro, as unease about the euro zone debt crisis prompted investors to switch to the UK currency. The pound was also supported by data showing UK house prices declined at their slowest pace since June 2010 in March.
The Royal Institution of Chartered Surveyors' (RICS) seasonally adjusted house price balance rose to -10 from -13 in February, beating forecasts for a reading of -12. "The euro is under pressure against the dollar and yen and rate spreads are moving in favour of sterling," said Paul Robson, currency strategist, at RBS Global Banking.
The euro was at 82.65 pence, not far from 82.30, its lowest level since early January, with strong support seen around the January 9 low of 82.22 pence. There is significant buying interest from companies around 82.00 pence with an option barrier also cited there, traders said.
Sterling was benefiting from safe haven-related flows from the Middle East and this was likely to help it against the euro, Morgan Stanley strategists said in a note. On a trade-weighted basis, the pound rose as high as 82.2, its strongest since mid-February 2011, Bank of England data showed. It was last at 82.0, unchanged on the day.
Against the dollar, sterling was lower at $1.5830 with the dollar and the yen benefiting from a drop in appetite for riskier assets like stocks. Near-term support for the currency lay at its 55-day moving average of $1.5819 with stops cited below $1.5800. It had fallen to an intra-day low of $1.5808 earlier in the day before buying by sovereign investors lifted it.
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