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Sterling holds close to 2021 low versus dollar

Wednesday,   24-Nov-2021   03:28 PM (IST)

The British pound was little changed on Wednesday, within striking distance of its 11-month low against the dollar, as expectations for a rate hike supported the greenback. Meanwhile, investors remained focused on whether or not the Bank of England will raise interest rates at its December meeting, while they wondered about the impact of the new wave of COVID-19 cases across the continent. At 0833 GMT, the pound was up 0.01% versus the dollar. It hit its lowest level since Dec. 22, 2020, on Tuesday at $1.334, as the renomination of Federal Reserve Chair Jerome Powell strengthened market expectations of U.S. rate rises next year. According to ING analysts, the pound is looking less vulnerable than the euro to the pandemic, although markets might be reluctant to speculate that Britain will dodge another COVID-19 severe wave. But, a decisive move below 84 pence against the euro “may signal investors are starting to price in diverging contagion/growth paths for the UK and the eurozone, something similar to what we saw at the beginning of the vaccination programme in 1Q21,” they said in a research note. Sterling was down 0.1% at 84.13 pence versus the euro, after hitting its highest since February 2020 on Monday at 83.8 pence. Although the pound picked up support earlier this month from rate hike talk, investors are increasingly wary of the outlook for UK yields. Bank of England (BoE) Governor Andrew Bailey raised further uncertainty over the weekend on the possibility of a rate hike in December by saying the inflation debate in Britain is finely balanced, according to analysts. Bailey said on Tuesday he might further scale back guidance on central bank policy, and the central bank could return to stating that the BoE would make decisions on a meeting-by-meeting basis.