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Tuesday 02nd of December 2008
January 15, 2007

Sterling strengthens on new data


by Elaine Frei

Sterling was stronger on Monday on new data and last week’s interest rate hike from the Bank of England. New figures showed that UK output prices were 0.2 percent higher in December. This was said to confirm the Bank’s idea that companies are finally widening margins after losses when energy prices were so high last year.

By mid-afternoon in New York, sterling had added 0.2 percent versus the euro to £0.6584, while it was up 0.3 percent on the US dollar to $1.9650 and had gained 0.5 percent to ¥236.70 in relation to the Japanese yen. The euro, meanwhile, added 0.2 percent versus the greenback, to $1.2940.

The yen weakened on the session, falling 0.2 percent versus the US currency to ¥120.50 and dropping 0.3 percent against the euro, to ¥155.85. Higher machinery orders in November were seen as a possible factor in persuading the Bank of Japan to raise interest rates later this week.

It has been reported in the Japanese media that the Bank’s governor was actively campaigning for a rate hike. On the other hand, comments from the secretary general of the ruling Liberal Democratic party that the government could try to amend the law to allow the government to overrule Bank decisions were seen as applying pressure against a rate hike. In any case, most analysts held a rate hike at Thursday’s meeting as unlikely.

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