Sterling strengthens on Bank of England meeting notes

Sterling strengthens on Bank of England meeting notes

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The US dollar weakened on Wednesday after Federal Reserve Chairman Ben Bernanke told a Congressional committee that both economic growth and the growth of inflation could be slowing down soon. While far from predicting an economic crash, the comments led most analysts to cut the chance that the Fed will raise interest rates in August despite new data that showed core inflation up more than had been expected.

The greenback dropped 0.2 percent versus both the Japanese yen and the Swiss franc, to ¥117.07 and SFr1.2498 respectively, while it fell 0.4 percent to $1.2557 in relation to the euro and was down 0.7 percent to $1.8376 against sterling.

Sterling strengthened in relation to other currencies as well, despite the fact that the release of minutes from the most recent Bank of England meeting showed that all seven members of the monetary policy committee had voted to keep interest rates at 4.5 percent. Besides its gain against the US dollar, sterling added 0.2 percent to £0.6832 versus the euro, was up 0.4 percent to SFr2.2967 in relation to the Swiss franc, and gained 0.5 percent to ¥215.10 versus the yen.

Emerging currencies benefited from the speculation that US interest rate rises will soon end. The South African rand added 1.2 percent to R7.071 versus the greenback while the Icelandic krona was up 1.5 percent to IKr74.26 to the dollar.