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Sterling declined 6.5% against nine currencies in past year

Published:  16 September, 2011

Sterling declined 6.5% against a basket of nine currencies over the past 12 months, making it the second worst performer after the US dollar.

Sterling declined 6.5% against a basket of nine currencies over the past 12 months, making it the second worst performer after the US dollar.

Currency Rates
EURO/GBP - 1.1409
US$/GBP - 1.5786
CHF/GBP - 1.3764
CAN$/GBP - 1.5534
AUS$/GBP - 1.5278
ZAR/GBP - 11.659
JPY/GBP - 121.23
HKD/GBP - 12.295
NZD/GBP - 1.9131
SEK/GBP - 10.423
AED/GBP - 5.793
US$/EURO - 1.3835

After an array of weak data, yesterday's sales figures proved to be no different. Figures showed a 0.2% decline in retail sales. The Office of National Statistics however did state that due to August London riots, where widespread looting occurred across a number of big retailers, it was difficult to quantify exact figures. Nonetheless, because of a rise in inflation coupled with low employment figures, the likelihood of retail figures being better than expected is still very slim. Uncertainty over a robust UK recovery still looms, making quantitative easing, once again, an attractive option for the central bank.

In the Euro zone, the euro jumped more than once cent versus the US dollar yesterday. This was largely due to the European Central Bank's decision to lend euro based banks dollars for a period of three months so as to ensure these banks have enough currency through the end of the year. Though inflation figures showed stability and President Papandreou committed to implement the necessary austerity measures for Greece in Wednesday's international call, many are still sceptical that targets will not be met. Due to this, euro gains are thought to be temporary, particularly against the US dollar. Investors are not willing to take risks at the moment and are seeking security in safe haven currencies.

In the US, the US dollar retreated after its three day winning streak against the euro. The greenback also extended losses versus the Swiss franc. Investors see this as only a temporary set back, for the debt crisis in the euro zone seems to be deepening. US consumer price figures came in better than expected, increasing by 0.4% in August, contrarily, factory activity in the Mid Atlantic decreased for a second month in a row. Though the US may show some signs of improvement, the economy is still struggling, particularly in the employment sector.

Elsewhere, the Australian dollar continues to decline versus the US$ as there is increasing speculation that the Australian Federal Reserve may cut interest rates due to a rise in unemployment. Yesterday the Swiss National Bank decided to hold interest rates at a record low of 2.5% so as to maintain the minimum exchange rate with the euro.

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