Sterling up on unexpected rate hike

Story link: Sterling up on unexpected rate hike

The Bank of England’s decision to raise interest rates in the UK strengthened sterling on Thursday. The surprising nature of the hike - most analysts did not expect the Monetary Policy Committee to raise rates this month - meant an extra boost for the UK currency.

Sterling added 0.5 percent in relation to both the US dollar and the euro, to $1.8865 and £0.6778 respectively. The UK currency was 0.6 percent higher to SFr2.3243 against the Swiss franc, a one year high. In addition, it gained 1 percent versus the Japanese yen to ¥217.26 and was up 1.1 percent in relation to the Australian dollar, to A$2.4813.

While the European Central Bank also raised interest rates in the Eurozone as well, the rate hike there was expected and did not benefit the euro to as great an extent. The shared currency did add 0.5 percent to ¥147.27 versus the yen, but an early gain in relation to the US dollar could not be sustained and the euro ended the session even against the greenback at $1.2792.

Elsewhere, the South African rand was up again, adding 0.9 percent to R6.840 to the dollar. The gain was attributed to a rate hike to 8 percent by South Africa’s Reserve Bank.

In emerging European currencies, the Icelandic krona was 1 percent higher to IKr70.65 versus the US dollar, while the Polish zloty gained 0.5 percent to 3.908 zlotys to the euro.