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Gains for sterling capped

Published:  08 June, 2011

Today's Smart Currency Exchange update shows sterling gained against a weaker US dollar but gains were capped and it slipped against the euro on soft UK data.

Currency rates, June 8:

EURO/GBP - 1.1186
US$/GBP - 1.6421
CHF/GBP - 1.3738
CAN$/GBP - 1.6041
AUS$/GBP - 1.5379
ZAR/GBP - 11.040
JPY/GBP - 131.30
HKD/GBP - 12.771
NZD/GBP - 2.0070
SEK/GBP - 10.078
US$/EURO - 1.4679

Figures from the Halifax showed that house prices increased by only 0.1% last month and an unexpected drop in retail sales undermined the fragility of the UK economy. With the Bank of England's monthly interest rate meeting on Thursday, this poor data only goes to support no change in monetary policy for another month as the MPC tries to avoid stifling UK growth despite rampant inflation.

In the euro zone, the euro hit a one-month high of $1.4682 against the US dollar, helped by more favourable German factory data, but also by a general US dollar sell-off. The euro also gained after a senior government official stated that the Greek government expects parliament to meet one of the conditions for receiving new international funding - namely voting through austerity measures to rein in spending. Against sterling, many investors are bracing for an interest rate hike in the euro zone in July which saw the euro gain.

The US dollar hit a record low against the Swiss franc and fell against other currencies on Tuesday after a senior Chinese foreign exchange regulator warned about the risks of investing too heavily in dollar-denominated assets. The US dollar has fallen by nearly 11% against the Swiss franc this year. In addition, US monetary policy is expected to remain unchanged for some time - a view that was enhanced last week after data showed the U.S. economy added far fewer jobs than expected in May.

Elsewhere, the Australian dollar was flat after the Reserve Bank of Australia kept interest rates on hold and gave no hints of tightening in the immediate future. The NZ dollar however climbed nearly 1% against the US dollar to as investors bought ahead of a central bank rate decision on Thursday. The South African rand was the best performer against the US dollar, rising 1.1%, after reports showed the central bank's foreign currency and gold reserves fell. The rand has gained 16% against the dollar in the past year.

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

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