Sterling rises versus dollar

Thursday June 25, 2009

LONDON: Sterling rose against the dollar on Wednesday as the US currency struggled ahead of the outcome of a Federal Reserve policy meeting and came under selling pressure against currencies perceived to be higher risk.

The pound was up on the day, but pared some gains against the dollar after Bank of England policymakers expressed doubts over how quickly the UK economy may recover, prompting some traders to take profits on earlier gains in the UK currency.

In testimony to the UK parliament, King said that he had genuine concerns about how quickly the UK economy will pick up from the recession. Other board members echoed this view, with Andrew Sentance acknowledging that he could not say how strong a recovery will be despite signs that the economy is stabilising.

"The overall tone is that it's too early to tell about a possible recovery, and that things are still uncertain," said Paul Robinson, chief sterling strategist at Barclays Capital in London. Other analysts said that comments from King that weakness in sterling was making the UK economy more competitive were nudging sterling lower.

Later in the day, the Fed is widely expected to quell recent speculation of a possible rise in interest rates this year, which analysts say may sting the dollar and benefit the pound. Traders shrugged off figures showing that UK retail sales in June fell at the same pace as the previous month. The CBI's distributive trades survey sales balance came in at -17, unchanged from May and in line with expectations.

By 1447 GMT, sterling traded 0.3 percent higher at $1.6507, after rising as high as $1.6605, not far from the year's high of $1.6664 hit early this month. The euro fell 0.7 percent to 84.85 pence, offering little lasting reaction to the BoE testimony. The dollar recovered early losses against the euro after the US currency was seen to be the biggest beneficiary of Swiss franc selling suspected by the Swiss National Bank on Wednesday.


(Reuters)