Investors favour sterling over dollar and euro

Published: 22 August, 2011

Sterling hit a 14 month high against the US dollar on Friday as investors favoured sterling over the US dollar and euro as the 'least worst' of the three.

Currency rates - August 22

EURO/GBP - 1.1448
US$/GBP - 1.6483

CHF/GBP - 1.2963
CAN$/GBP - 1.6266
AUS$/GBP - 1.5820
ZAR/GBP - 11.861
JPY/GBP - 126.54
HKD/GBP - 12.855

NZD/GBP - 2.0078
SEK/GBP - 10.487
US$/EURO - 1.4398

Sterling also gained support from data that showed the UK government's public finances posted a surplus in July, putting the government on track to meet its deficit reduction plan. The focus has shifted away from the UK for now as investors look much more closely at the USA and euro zone, but that does not mean the UK is performing well.

In the euro zone, the euro was helped to an extent by discussions over central "Eurobonds", with markets optimistic over the prospect of a centralised funding option, rather than individual governments taking responsibility for their borrowing. This prospect is unlikely for a number of years - if at all. One key European Central Bank official expressed concern over the weekend that countries in the region are not pushing through parliamentary approval of the European Financial Stability Fund quickly enough.

In the USA, the US dollar continues to suffer from negative sentiment related to stock markets and debt in the country. As such, the currency was significantly lower on Friday as investors looked for safety in other currencies.

Elsewhere, as Libyan rebels enter Tripoli we could see some volatility on markets depending on what transpires. The situation there is still fluid, but given the region's relationship with oil, we could see some price movement on that and other commodity based currencies such as the Canadian dollar.

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. www.SmartWineSpirits.com

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