LONDON, April 29 (Reuters) – The pound reached its highest in around two weeks against the dollar and the euro at the start of a week packed with market-moving events, and fell more than 1% against the yen, as traders said Japanese authorities intervened to support their currency.
The pound was last at 195 yen, down 1.22% on the day after briefly nudging above 200 yen in early Asia trade, its highest since 2008.
The volatility in the pound versus the yen was all about the yen side of the pair, as traders said Japanese authorities bought the yen, which is at its weakest against the dollar since 1990, as its weakening trend accelerated sharply in the last two sessions.
Versus the dollar, the pound was up 0.27% at $1.25275, its highest since April 12, a small recovery from five-month lows in mid April, when investors’ expectations the Bank of England would cut interest rates earlier than the Federal Reserve caused them to sell the pound.
Markets expect the Bank of England to start cutting rates in August, while the Fed is expected to wait until later in the year, causing the gap between US and British government bond yields to widen.
Economic data since then however has helped the pound – and the euro – perform better than the gap between US and European and British rates would indicate, MUFG analysts said in a note.
“Cable (the pound versus the dollar) was trading closer to the 1.2000-level when yield spreads were last at current levels just over a year ago,” they wrote.
“The negative impact from the energy price shock in the region continues to fade, and we saw more convincing evidence over the past week that economic growth is beginning to pick up.”
Euro-zone and UK services PMI surveys last week both climbed to their highest levels in almost a year, possibly indicating that the period of economic stagnation is ending.
The pound was also slightly firmer on the euro at 85.52 pence to the common currency, sterling’s strongest since April 17.
Reporting by Alun John; edited by Barbara Lewis
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