Sterling Rebounds after SNB comments

Tom Tong30/Sep/2011Currency Updates

GBP

Sterling struck a one-week high against the dollar on Thursday, and pared losses against the euro, after a Swiss National Bank official said the central bank would look to increase its weighting of sterling assets in a year’s time.

The SNB currently holds 3 percent of its FX reserves in sterling, having held as much as 10 percent between 2004 and 2008. In contrast, it holds 55 percent of its reserves in euros, as of the end of the second quarter of 2011 according to its website.

No data due to be released today.

EUR

The euro is on track this morning for its biggest monthly slide in nearly a year, slipping back towards an eight-month low against the dollar a 10-year low versus the yen.

Jitters over the spiralling European debt crisis, sovereign exposure of European banks and a slowing global economy caused investors to slash their bets on risky assets in the July-September quarter, sending the common currency down almost 10c versus the dollar over the period. Financial markets are already anticipating a likely Greek default and demanding more far-reaching measures to prevent the crisis that began in Athens from spreading far beyond Europe and its banks.

Concerning ECB rates, swaps traders are betting the central bank will lower the rate by 35 basis points over the next 12 months, according to a Credit Suisse Group AG index. That compares with a 25 basis- point increase projected at the beginning of August.

USD

The US dollar fell back against most major currencies on Thursday, after Germany’s parliament voted overwhelmingly to boost the Eurozone rescue fund and positive US growth and unemployment figures. The US economy grew at an annualised rate of 1.3% between April and June, the Commerce Department has said in its third estimate for the quarter. This is higher than the 1% growth it reported in its second estimate, with Consumer spending and exports both stronger than previously estimated.

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Written by Tom Tong

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