Sterling stronger on economic growth report

Sterling stronger on economic growth report

Story link: Sterling stronger on economic growth report

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The US dollar was much weaker on Tuesday on comments from the president of the San Francisco Federal Reserve and the governor of the Bank of Japan that resulted in sell-offs. Just after midday in New York, the greenback was down 0.7 percent versus the euro to $1.2800, 0.8 percent lower against the Japanese yen to ¥117.45, and it had fallen 0.9 percent in relation to the Swiss franc, to SFr1.2465.

Janet Yellen, president of the Fed in San Francisco, said that some nations with extra savings could decide to invest less money in the United States, but analysts pointed out that such warnings of diversification by central banks had been sounded in the past and that former Fed chairman Alan Greenspan has spoken to the issue more than once in the recent past. Meanwhile, in Tokyo, Toshihiko Fukui said that the Bank of Japan should not wait for inflation to go up before raising interest rates and should instead raise rates moderately ahead of inflation. Analysts also discounted these remarks, putting them down to an attempt to moderate expectations on rates.

Sterling strengthened on the session, adding 0.1 percent against the euro and gaining 0.6 percent on the US dollar to $0.6700. The advances came after the National Institute of Economic and Social Research estimated that in the three months up to October, the UK economy grew at a quarterly rate of 0.7 percent and said that the Bank of England needs to raise interest rates when it meets on Thursday. It also said that it sees the likely need for another rate hike in February.

The Australian dollar also added 0.6 percent versus the greenback, to $0.7760 in anticipation of a new decision on interest rates from the Reserve Bank of Australia, due Wednesday.