Make Kitco Your Homepage

Sterling weakens against resurgent dollar

Kitco News

* Graphic: Trade-weighted sterling since Brexit vote (Updates prices)

LONDON, March 5 (Reuters) - The British pound lost ground against a resurgent dollar on Friday, as currency traders took some risk off the table amid rising U.S. bond yields.

U.S. Federal Reserve Chair Jerome Powell failed to soothe investor concerns about a recent surge in borrowing costs as he spoke at a Wall Street Journal forum on Thursday, pushing the safe-haven dollar higher.

Sterling fell to a three-week low against the dollar, briefly dropping below $1.38. It was last down 0.6% at $1.3810.

The pound had reached as high as $1.42 last month - its highest level since 2018 - as optimism built about Britain’s swift introduction of COVID-19 vaccines and expectations of a robust economic recovery.

“The dollar is rebounding along with longer term U.S. yields, which is triggering a reversal of trades including for the pound,” said Lee Hardman, currency economist at MUFG.

“But the fundamentals are moving in a positive direction for the pound with the vaccine rollout and growing hopes of a recovery. The pound should strengthen after this near-term correction.”

Analysts said British finance minister Rishi Sunak’s budget plan for the economy, which included a further extension of pandemic stimulus packages and some tax rises, could also ultimately strengthen the pound.

“This should keep fiscal policy loose, which should keep the Bank of England in a hawkish mood while expecting a robust economic recovery in the next few months. This mix should keep supporting sterling beyond $1.40,” said Gaetan Peroux at UBS.

Against the euro, the pound dipped around 0.1%, last at 86.24 pence. (Reporting by Iain Withers, editing by Larry King and Timothy Heritage)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.