In a day short in economic data or announcements, sterling reached an eight month high against the US dollar to hit briefly hit a rate of $1.6065.
The catalyst for heavy selling pressure on the greenback came from Asia overnight as the Monetary Authority of Singapore opted to tighten policy by appreciating their currency and selling the US dollar. Further speculation that the Fed will pump an extra $500billion put even more pressure on the greenback and the UK currency looks like it could hover around the $1.60 level for some time. Whilst all of this dollar selling has been going on, the pound stayed close to its weakest level in almost six months against the euro as concerns that the Bank of England could follow the Fed and increase its monetary easing policy.
In other news, the Australian dollar has powered to a new 28-year high to nearly hit parity with the greenback, its strongest level since it was allowed to freely float in 1983 hitting $0.9992 earlier today. It looks like parity is only a matter of time now. In fact, the aussie has risen 66% in 24 months. Good on ya, you flaming galah!
Tom Hampton
Analyst – Caxton FX
