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Sterling hits four month high against euro

Published:  11 January, 2011

Sterling hit a four-month high against the euro yesterday as the single currency was dogged by concerns over the debt problems in the euro zone.

Currency Rates

EURO/GBP - 1.2015
US$/GBP - 1.5552
CHF/GBP - 1.5092
CAN$/GBP - 1.5425
AUS$/GBP - 1.5788
ZAR/GBP - 10.6130
JPY/GBP - 129.25
HKD/GBP - 12.099
NZD/GBP - 2.0474
SEK/GBP - 10.677
US$/EURO - 1.2940

Sterling was also helped against the euro as many (including PM David Cameron) believe inflation is too high in the UK and as such the Bank of England will need to raise interest rates sooner than expected, but the Bank is expected to keep rates on hold this Thursday in the first meeting of the year. The pound suffered against the US dollar after figures showed that house prices fell by 1.6% in the year to December - the biggest drop since November 2009.

In the euro zone, the euro suffered after a senior source was quoted saying that euro zone countries were piling the pressure on Portugal to seek financial aid from the European Bank and the International Monetary Fund in order to stem the risk of 'contagion' spreading to other countries in the region. This led to the single currency falling to a four month low against both the euro and US dollar but it did stage a slight rally towards the end of the day as 'short sellers' (i.e. those selling the currency and buying back at a lower price for profit) closed out positions at profit. Despite this recovery, the euro is set to remain under significant pressure.

In the USA, the US dollar hit a four month high of $1.29/€1 and regained ground lost against sterling on Friday. As 'earnings season' kicked off on Wall Street (where companies announce corporate earnings to the stock market), the US markets had strong expectations and as such shook off any worries related to Europe.

Elsewhere, the Chilean peso and Brazilian real suffered in risk related selling following the crisis in the euro zone. 'LatAm' currencies, as they are known, correlate closely with risk appetite and a poor performance from the euro sees the South American currencies suffer.

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