Sterling flat ahead of rate decision

Story link: Sterling flat ahead of rate decision

The US dollar remained close to Tuesday’s levels on Wednesday in the wake of election results that put the Democratic Party in the majority in the United States House of Representatives. Control of the Senate still had not been decided on Wednesday morning due to at least one race, in Virginia, that was too close to call.

Analysts were divided on what the outcome of the election meant. Some said that the change in the balance of power would mean very little to the markets absent any other factors. Others felt that the election results were strongly dollar-negative due to the potential for stalemate in the Iraq situation between the Republican White House and the Democratic House as the Bush administration continues to press its objectives in the face of serious questioning from the House.

At mid-afternoon in New York, the greenback was even against the euro at $1.2770, while it had gained a bare 0.1 percent to ¥117.8 versus the Japanese yen.

Sterling was even in relation to the US currency at $1.9050 and dropped 0.1 percent to the euro, to £0.67.04 as investors waited for the Bank of England to make its next interest rate decision on Thursday. Most analysts believe that a rate hike from the Monetary Policy Committee is a done deal, especially after new data that shows shop prices in October going up at their fastest rate since May 2004.

In other interest rate news, the Australian dollar dropped 0.6 percent versus the greenback to $0.7680 after the Reserve Bank of Australia raised interest rates there by 25 basis points to 6.25 percent, as it had been expected to do.

The Chinese renminbi added 0.1 percent to Rmb7.8719 to the dollar, a new high since its revaluation last year.