Sterling falls below 2 against the aussie dollar for the first time since 1996

The Australian dollar dropped below the 2 mark against sterling yesterday, in the first time in nearly 13 years. Sterling fell sharply against the aussie as the BoE surprised markets by extending its quantitative easing program and committing more money to its asset buying scheme. Many in the market had expected the central bank to wait until its initial 3 month plan had finished before determining whether further liquidity was needed. The aussie continued to be well supported as its high yield attracted more investors as optimism over the financial sector grows. Some analysts have suggested that sterling’s value now represents the effect of quantitative easing and low interest rates and this does not suggest that the currency will weaken any further. However, if optimism over the recovery of the global economy continues demand for high yield currencies is also likely to grow. This means that over the shorter term the aussie is likely to be better supported over the pound.