Currency update, June 2: sterling bounces back

Published: 02 June, 2010

Today's currency analysis from our currency partners Smart Currency Exchange has at long last some good news for sterling.

Sterling rose against the US dollar and hit the highest level against the euro for eighteen months.

The pound was given a boost as speculation grew that Prudential may abandon the bid for AIG's Asian insurance business - which has this morning been confirmed.

When the $30bn bid was initially announced, many traders bought US dollar positions to protect themselves against the huge market movement that a purchase of $30bn from sterling would cause. At the time, this saw a large drop in sterling's value against the US dollar. Therefore, with the deal now potentially off, investors and traders have bought back sterling from US dollar and as a result, given the pound a well needed boost.

Against the euro, the pound has breached the €1.20/ £1 level for the first time since late 2008. Strong factory data in the UK suggested that the UK had not been affected by the problems in the Euro zone to the extent that many had thought.

Today's currency rates:
EURO/GBP - 1.200
US$/GBP - 1.468
CHF/GBP - 1.696
CAN$/GBP - 1.547
AUS$/GBP - 1.764
ZAR/GBP - 11.324
JPY/GBP - 134.66
HKD/GBP - 11.450
NZD/GBP - 2.175
HUF/GBP - 331.05

In the euro zone, the euro suffered considerably yesterday against the US dollar and sterling. Against the US dollar, the euro is at €1.22/ $1 and €1.2020/ £1 against the pound. Concerns over bad debts in the euro zone continued to push the euro lower against most major currencies. T

The only real data out today is monthly PPI data and this is unlikely to have any effect on the generally negative sentiment towards the euro zone. Be warned if you have euros that need moving into sterling or US dollars, the rate is likely to get worse.

In the USA, with a fairly light day on the economic calendar, the major driver of the US dollar movement yesterday was the failed Prudential bid. This saw a scramble to pull out of protective 'hedging' positions and as a result the US dollar fell against the pound.

Elsewhere, the Japanese yen has weakened this morning as news was released that Prime Minister Yukio Hatoyama had resigned. In addition, many analysts are expecting the Australian and New Zealand dollar to strengthen as increased optimism over Asian economies is likely to drive huge demand for commodities - most of which are sourced in AUS/ NZ dollars. This is could see the pound fall against those currencies.

* Smart Currency Exchange is a currency partner to Harpers Wine and Spirit. Harpers Wine and Spirit has teamed up with Smart to provide readers with a free bespoke currency service.

* If you are making or receiving international payments and are interested in talking to Smart please go to: www.SmartWineSpirits.com to get a FREE no obligation quote or to download the Smart Wine and Spirit report. Alternatively call Smart on 0207 898 0500.

* If you would like to receive this daily currency update direct to your inbox then register with Richard Siddle on richard.siddle@william-reed.co.uk

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