Sterling gained broadly on Thursday, jumping over one and a half percent against the dollar on optimism about the prospects for coordinated steps by Group of 20 leaders and encouraging UK house prices and manufacturing data. Investors were encouraged to buy assets perceived to be risky, including sterling, after sources said the latest draft of the G20 communiqué calls for an increase of International Monetary Fund resources of $500 billion. Sterling gained an additional boost from stronger data out of the UK, with Nationwide reporting UK house prices unexpectedly rose 0.9 percent in March, the first rise since October 2007. Everything is going sterling's way at the moment, Barclays Capital chief sterling strategist Paul Robinson said. The GBP/USD is currently trading at $1.4685 as of 8:45am, GMT.
The dollar's role as a reserve currency won't be threatened by a nine-fold expansion in the International Monetary Fund's unit of account, according to UBS AG, ING Groep NV and Citigroup Inc. Group of 20 leaders yesterday gave approval for the agency to raise $250 billion by issuing Special Drawing Rights, or SDRs, the artificial currency that the IMF uses to settle accounts among its member nations. It also agreed to put another $500 billion into the IMF's war chest. “I don't think that will dent the importance of the dollar,” Wang Tao, head of China research at UBS AG and former IMF economist, said in an interview today. “They are not talking about an expansion in the use of the SDR.” The EUR/USD is currently trading at $1.3433 as of 8:55am, GMT.
Investors should bet the Australian dollar will gain against New Zealand's as the bigger nation's central bank has been more effective in lowering borrowing costs, Royal Bank of Canada said. Investors should also purchase Norway's krone against Sweden's currency for similar reasons, the bank said. “The Reserve Bank of Australia and Norges Bank are much further ahead of the curve in loosening policy than their regional counterparts,” wrote Adam Cole, global head of currency strategy in London at Royal Bank of Canada.