Interest rate decisions help sterling, euro, rand

Story link: Interest rate decisions help sterling, euro, rand

Sterling gained back some of its recent losses in relation to the US dollar on Thursday after the Bank of England’s Monetary Policy Committee decided to cut UK interest rates from 5.75 percent to 5.5 percent.

It was the first rate cut there in over two years and was unexpected by all but a minority of analysts, with most believing that the Bank would hold rates steady.

In early afternoon trade in New York it took $2.0299 to buy a pound and the yen was trading at ¥225.5621 to the pound after having been at ¥224.6246 to the pound at roughly the same time in Wednesday’s session.

Meanwhile, the European Central Bank held interest rates steady at 4 percent as the Bank’s President, Jean-Claude Trichet, made comments that seemed to rule out any possibility of any rate cuts in the near term.

In the remarks released with announcement of the ECB’s decision, Trichet said that there is still “strong short-term upward pressure on inflation.”

It was a stronger statement than many analysts had expected.

The euro traded at €1.3856 to the pound while it took $1.4650 or ¥162.7908 to buy one euro at early afternoon in New York.

In other interest rate news, South Africa’s central bank raised interest rates there from 10.5 percent to 11 percent, sending the rand up against all 16 of the globe’s most actively traded currencies, including a gain from 6.7787 rand to the dollar to 6.7386 rand to the dollar.

The US Federal Reserve will meet to make a decision on US interest rates next week.

Elsewhere, both the yen and the Swiss franc declined as investors were willing to take on more risk ahead of an expected plan to ease subprime mortgage defaults in the United States.