LONDON: Sterling was firm near a four-month high against the dollar on Monday as the Federal Reserve's move to ease monetary policy drove more investors to sell the US currency.
It was also firmer against the euro with investors waiting to see if Spain will ask for aid to tackle its debt. Analysts said Madrid appeared to be paving the way for requesting such assistance after it said it would set clear deadlines for structural reforms by month-end.
Sterling was marginally higher at $1.6220, having hit a peak of $1.6225 on Friday, its strongest since late April. Data from the Commodity Futures Trading Commission showed speculators turned negative on the US dollar in the latest week to Sept. 11, while they cut bets against the pound.
Traders and analysts saw the potential for more gains due to the Fed's new bout of quantitative easing, which increases the supply of a currency and typically cheapens it, potentially taking sterling towards this year's high of $1.6304.
"Cable (Sterling/dollar) has been fairly well bid in the past few sessions and we expect that trend to continue, primarily because of the dollar's weakness. We see it rising to $1.63 in the near term," said Michael Derks, chief strategist at FXPro.
Sterling has also been underpinned by better UK data in recent weeks. That has lessened concerns about the outlook for the economy and the prospect of more quantitative easing from the Bank of England.
The BoE will release minutes of the last monetary policy meeting this week which will show the balance of views on further stimulus. Most analysts do not expect any easing by the BoE at least until November.
The euro was down 0.1 percent at 80.88 pence, pulling back from a three-month high of 81.14 struck on Friday.
The shared currency has broadly outperformed after the European Central Bank announced a bold plan earlier this month to lower borrowing costs for the bloc's most troubled debtor countries, helping shore up sentiment towards the region's assets.
Some traders said the pound could regain some of its lost ground against the euro because recent data suggested the euro zone was still grappling with a sharp economic downturn, which could drive the ECB to lower rates in coming months.
Comments
Comments are closed for this article.