LONDON, March 25 — Sterling extended its rally today as the safe-haven US dollar fell across the board on some signs of stabler risk conditions amid the coronavirus crisis.
A rally in global stocks also helped, analysts said, given Britain’s economy is so heavily reliant on financial markets.
“Sterling is a benefiting part of dollar weakness,” said Neil Jones, head of European hedge-fund sales at Mizuho, adding that positive share sentiment and signs of coronavirus containment in China were also supporting sterling.
“We’ve got some stability with China returning to normality, (so) maybe there is a light at the end of the tunnel,” he said.
The pound was last trading up 1.4 per cent at US$1.1936 (RM5.24), having hit earlier a one-week high of US$1.1971. Last week, it briefly touched a 35-year low of US$1.1413.
Against the euro, sterling was also higher by one per cent at 90.81 pence — off last week’s lows of 95 pence.
Investors found some comfort that the severe impact of Covid-19 on Britain’s economy could be somewhat alleviated by financial stimulus from both the Bank of England and government.
On Monday, Britain’s government opened the first part of a €330 billion loan guarantee scheme for businesses, which will help small and medium-sized firms borrow up to €5 million to deal with stoppages.
On top of that, the BoE last week embarked on the most rapid asset purchases in its history by promising €200 billion of bond purchases and lent more than US$15 billion to banks to limit the economic and market impact of the coronavirus.
It also cut interest rates to nearly 0 per cent.
The index for Britain’s top 100 companies jumped to its highest level in two weeks today, mirroring the rally in equities in other financial hubs across the world. — Reuters