Pound rises as BoE puts QE on hold

The pound swiftly reversed earlier losses against other major currencies as the Bank of England said it would not be introducing a fresh round of monetary easing into the UK economy.

Sterling had fallen against the dollar, yen and the euro ahead of the decision as markets grew cautious that the central bank might be spurred to inject the market with fresh cash.

                               

The pound hit a fresh annual high against the euro of €1.2497 after the BoE held rates at 0.5 per cent, its strongest level against the single currency since November 2011. It rose 0.2 per cent against the dollar to $1.6160 and was 0.5 per cent higher against the yen at Y129.11.

The euro halted its downward trend after losing value in the previous eight trading sessions. The single currency was 0.2 per cent higher against the dollar at $1.2959, with foreign exchange traders reporting that technical positioning, rather than newsflow, was affecting the market.

The yen pared recent gains against the dollar after reaching its strongest level against the US currency since mid-February the previous day. The dollar rose 0.3 per cent to Y79.92.

Currencies tied to global growth regained some of their value after steep losses the previous day. The Australian dollar was one of the biggest movers, rising 0.7 per cent to $1.0108 against the US currency. The New Zealand dollar rose 0.5 per cent to $0.7869.

But the Norwegian and Swedish krone continued to lose value against the US dollar, as the currencies remain affected by the eurozone fallout.

The dollar rose 0.4 per cent to NKr5.8591, its strongest level since mid-January, as Norway’s central bank held interest rates as expected at 1.5 per cent.

The greenback gained 0.6 per cent against the Swedish krona to SKr6.9354, also the highest since the start of the year.

“The Norwegian krone remains torn between solid domestic fundamentals and escalating eurozone debt crisis,” said Valentin Marinov at Citigroup.

“The problems in the single currency area keep risk-takers at bay for now and provide less support for G10 smalls like the Norwegian and Swedish krone.”