LONDON, Sept 22 (Reuters) – Sterling rose, after slipping to a fresh 37-year low, against a weakening U.S. dollar on Thursday ahead of a Bank of England meeting and after a slew of central banks’ rate hikes.
Traders were awaiting for an expected BoE interest rate hike at 1100 GMT with money markets pricing in at least a 50-basis point increase by the BoE in the face of red-hot inflation that is just off a 40-year high.
This summer, rising interest rates in Britain have provided little support to sterling amid a gloomy outlook for Britain’s economy and a cost of living crisis.
“There is little to no confidence that the BoE can pull something out of the bag that will support the pound today,” said Jane Foley, head of FX strategy at Rabobank in London.
“Since May it has been clear that BoE rate hikes are not having much of an impact in halting downside pressure on sterling with UK fundamentals undermined by slow growth, a huge current account deficit and recently by concerns over the fiscal outlook,” she added.
Sterling was up 0.5% at $1.13255 against the weakening dollar at 0900 GMT . Against the euro, it was flat at 87.24 pence.
The pound has softened 16% against the dollar this year, slipping to a fresh 37-year low in early London trading.
It trimmed some of those losses as the dollar lost some grounds after Norway’s and the Swiss central banks raised interest rate, while Japan intervened in currency market to buy yen for the first time since 1998.
That came after the Fed hiked interest rates on Wednesday by three-quarters of a percentage point for a third straight time and signaled that borrowing costs would keep rising this year.
Versus the Swiss franc , sterling surged 1.25% to 1.1019 after the Swiss National Bank raised its policy interest rate by 0.75 percentage point on Thursday.
“The sell off in the Swiss franc in the wake of the SNB’s 75 bp rate hike this morning has highlighted the difficulties that central banks (other than the Fed) are having in stabilising their currencies,” Foley added.
Reporting by Joice Alves; Editing by Kim Coghill
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