AUS
NZ
UK
CA
USA
IND
Summary
- The pound sterling has been hovering near its 12-month high against the US dollar following the successive appreciation in the last few weeks
- On the other hand, the US dollar has fallen to its two-and-half-year lows against a pool of currencies with the persisting volatility in the foreign exchange markets
The persisting volatility in the financial markets due to the coronavirus pandemic-led disruption in the apparently smooth international trade has triggered a slide in the strongest international currency -- the United States dollar. With the ongoing weakness in the US dollar against a number of counterparts, the Great Britain pound has steadily strengthened to a 12-month peak.
A considerable upsurge has been observed in the pound sterling against the greenback especially from July 2020 after the UK government eased a bunch of restrictions that were obstructing the basic operations of various small-to-large-scale businesses. In a largely similar stretch from July onwards, the UK equity markets have also seen a series of major gains lifting the headline stock index FTSE 100 to a six-month high.
The Great Britain pound, oscillating near the 12-month high levels against the United States dollar, has seemed to have steered a wave of confidence in the investors looking forward to monetise the gains from the UK equity markets. Following the market-wide value-buying across Britain, the broader stock indices including FTSE 250 and FTSE 350 are oscillating near their respective 9-month peaks.
GBP @ 12-month high
The GBP trading around its 12-month highs has regenerated the low confidence of the investors. According to the latest foreign exchange data available with the Bank of England, the pound sterling hit a 12-month high of 1.3497 per unit US dollar on Thursday, December 3. Earlier this year, pound sterling touched a high of 1.3450 vs USD on September 1, the BoE data showed.
However, the strength of the pound has reduced against few regional counterparts including the widely used euro and Chinese yuan. As per the exchange rate data with BoE, the pound sterling has shed as much as 5.65 per cent against the euro in the present calendar year. Based on the end of trading on December 3, a unit of euro equalled GBP 1.11 as compared to a level of 1.1765-pound sterling per euro as on December 31 last year.
Moreover, the pound recently lost some weight against the Chinese yuan. As per 3 December’s data, a unit of pound equalled 8.8295 Chinese yuan as compared to 9.1829 yuan on September 1 and 9.1926 yuan on December 31 last year.
GBP vs USD (1-year performance)
(Source: EODHD/Others, Thomson Reuters)
USD falters around 2-½ year low
The depreciation in the US dollar can be attributed to the lower-than-expected quantum of the stimulus measures announced by the erstwhile Donald Trump administration in response to the global health emergency, the continuously-escalating frequency of coronavirus cases, and the murkier business outlook for most of the small-to-large-scale business. The euro has recently broken major resistance levels following a growing number of investors betting against the USD, anticipating a further plunge in the so-called safe-haven currency.
On the contrary, the greenback may bounce back sharply from the two-and-half-year low level following the drug regulator’s green nod to several pending authorisation applications with regards to the potential coronavirus vaccines. The euro sitting comfortably above the psychological level of $1.2000 has also hampered the position of the American dollar in the foreign exchange market, while the conclusive decisions taken by the US Federal Reserve have further weakened the greenback in the current calendar year.
The dollar has depreciated by nearly 12 per cent in the present year from the three-year peak of 102.990 against a pool of currencies. On Friday, December 4, the USD hovered near a two-and-half-year low of 90.504 vs a basket of currencies. The greenback has touched a nearly two-and-half-low level of 1.2175 against a unit of euro. A largely similar low of the dollar has been observed against the Chinese yuan with a unit of greenback equalling 6.5182 yuan (29-month low), while the USD has collapsed to about four-and-a-half-low against the Japanese yen with a unit of dollar totalling 103.99 Japanese yen as on December 4.
Euro vs USD (3-year performance)
(Source: EODHD/Others, Thomson Reuters)
CNY vs USD (3-year performance)
JPY vs USD (5-year performance)
(Source: EODHD/Others, Thomson Reuters)
