Pound gains on US dollar, euro, yen

Story link: Pound gains on US dollar, euro, yen

The pound was stronger versus the US dollar, the euro and the yen on Tuesday on sentiment that the Bank of England will be able to avoid cutting interest rates when it meets later in the week.

Helping the gain was new data showing that while UK home prices dropped 0.8 percent in the last quarter of 2007, the price of a home added 1.3 percent in December over November’s price.

On the other hand, UK business confidence was down and new figures from the British Retail Consortium showed that sales grew at its slowest rate since March 2006 in December.

It took $1.9739 to buy a pound at just before 1 p.m. in New York, while the yen traded at ¥215.9992 to the pound and the euro sat at €1.3412 to the pound.

The yen dropped against all major currencies as gains in equities markets and a perceived easing of credit markets induced investors to seek out risky carry trades.

The enthusiasm for such risky investments sent the yen down the most against the Australian dollar, Brazilian real and South African rand, to ¥96.5347, ¥62.380, and ¥15.943 respectively in early afternoon trade in New York.

Elsewhere, the yen traded at ¥109.4250 to the US dollar and at ¥161.0463 to the euro.

The US dollar was also lower against most currencies, trading at $1.4718 to the euro, as analysts speculated that the Federal Reserve could cut interest rates as much as half a percentage point when it meets later in the month after the president of the Philadelphia Fed said that more cuts will be necessary if the growth outlook for the US economy weakens more than it already has.