Sterling fell to a seven-week low against the euro on Thursday, hitting a two-month trough on a trade-weighted basis, with traders citing year-end clearer selling while thin liquidity exaggerated price movements. A 1 percent drop against the euro in very low volume pushed the pound down across the board, taking it to a near two-year low versus the yen, an all-time low against the Swiss franc and a multi-year low against the New Zealand dollar.
It also lost more than half a percent against the US dollar, dropping more than one cent below a high touched in early trade that marked its strongest in over a week. "Sterling has seen quite a move but it has all been down to selling by a particular clearer," said Neil Mellor, currency strategist at Bank of New York Mellon.
The euro is only around 3.6 percent below a peak above 89 pence reached against the pound in late October before the Irish debt crisis hit, while against the dollar it is nearly 7 percent below its early November peak. The euro was up 1 percent at 86.10 pence, having hit a high of 86.24 pence, its strongest since November 10. This helped push sterling's trade-weighted index to a two-month low of 79.1
In a technically bullish signal for euro/sterling, the pair's 100-day moving average, currently at 85.02 pence, crossed above its 200-day moving average, at 84.94 pence this week. Sterling was down 0.5 percent at $1.5420, though it held above support at its 200-day moving average at $1.5402 and a 3-1/2 month low of $1.5345 hit earlier this week, which has seen some sharp moves in choppy trade. However, the pound was well below a high of $1.5535 hit in early trade when lower US bond yields put the greenback under pressure.
Sterling hit an all-time low versus the Swiss franc of 1.4453 francs and fell to 125.53 yen, its weakest since February 2009, as both currencies benefited from investors seeking safe haven assets.
"Sterling does look very heavy but with a lack of liquidity in the market we are seeing all it takes is one large trade and the sentiment is set for the day," a London-based trader said. The pound also dipped to a multi-year low of NZ$1.9965 against the New Zealand dollar, which was lifted by gains in commodity prices.