Sterling Rebounds as Yen Surges and Oil Prices Ease Amid Market Shifts
Market Movements and Currency Reactions
LONDON, Sept 3 (Reuters) - The pound rose slightly on Thursday after hitting a three-week low the previous day, getting a lift from a sharp rally in the yen that knocked the U.S. dollar as well as a calming of oil prices.
Sterling Performance Against Major Currencies
Sterling climbed 0.1% to $1.35, having fallen to a three-week low of $1.348 in the previous session as the safe-haven dollar rose following renewed strikes between the U.S. and Iran.
Impact of Yen Rally and Dollar Weakness
Yet a jump in the yen — which analysts said reflected rising Bank of Japan rate hike bets, although they remained alert to the risk of official intervention — caused the dollar to fall across the board on Thursday.
Oil Price Movements and Their Effects
Meanwhile oil prices slipped from a more than one-month high after a calmer day in the Middle East, helping Brent crude fall 1% to $95 a barrel.
Sterling and Euro Stability
The pound was little changed against the euro, with the euro zone's currency buying 85.93 pence.
Bond Yields and Fiscal Implications
A selloff in global bond markets which pushed Britain's benchmark 10-year yield to its highest level since 2007 on Wednesday abated on Thursday, with the yield down more than 3 basis points.
Government Borrowing Costs and Political Impact
The jump in yields, a proxy for government borrowing costs, has eroded some of the government's so-called headroom against its fiscal rules, a headache for new Prime Minister Andy Burnham as his finance minister John Healey prepares to present a budget in October.
Rate Hike Expectations and Investor Sentiment
Markets have raised their bets on rate hikes around the world as the U.S.-Iran conflict has again pushed up energy prices, with traders now fully pricing in a Bank of England rate hike by the end of the year and another by March.
Analyst Insights on Sterling's Prospects
Mark Haefele, UBS Global Wealth Management chief investment officer, said sterling looks attractive in a note to clients on Thursday.
Positive Outlook for Sterling
"We... continue to view sterling positively, supported by improving confidence in UK assets, a more fiscally credible political backdrop, and the potential for investors to reduce still substantial short positions."
Role of UK Bond Yields
He added that higher yields on UK bonds also boost the appeal of the pound.
Year-to-Date Performance and Economic Indicators
Sterling has risen very slightly this year against the dollar, while the euro has fallen more than 1%, supported by some signs that the UK economy is faring better than expected.
(Reporting by Harry Robertson; Editing by Jan Harvey)
