Dollar takes a pounding as sterling hits January levels
THE pound has bounced back to prepandemic levels against the dollar as investors bet that the worst of the Covid crisis has passed in Europe.
Sterling rose as high as $1.3267 on a fifth day of gains, lifting it above its January level for the first time, before slipping back later in the day. The rally has been driven by a fall in the dollar as investors move their cash out of safe haven US assets.
It caps off a remarkable turnaround after the pound hit a 35-year low of $1.1450 in March. Last night it was trading a little over $1.31.
Ranko Berich of Monex Europe said the rise in sterling should not be seen as a vote of confidence in Britain, and that Brexit jitters are still likely to have an effect.
September’s Federal Reserve meeting will be crucial to the US currency’s fortunes, with low interest rates and money printing putting the dollar under pressure as America struggles to bring outbreaks of Covid in Texas, Florida and California under control.
Bloomberg’s dollar spot index – a measure of the greenback’s performance against a basket of other currencies – hit a two-year low on Tuesday.
The pound has recovered about 16pc from its mid-March trough, but at a slower pace than other currencies.
Several major continental currencies are up more than 6pc this year against the dollar, with March’s market tumult representing little more than a blip for the euro after investors cheered unprecedented joint borrowing plans.
Strategists at Dutch lender ING said that the pound’s strength has partly been driven by less of a focus on Brexit as investors pay more attention to coronavirus. But they warned this situation could change as negotiations approach a climax, with current trading rules due to end in December.
The dollar has fallen against sterling and a basket of other currencies, partly due to US failure to contain Covid