LONDON, Sept 2, 2015:
Sterling remained on the defensive today, touching its lowest level against the US dollar in almost three months as investors continued to bet that the Bank of England won’t raise interest rates until well into next year.
A report on UK construction sector activity released today showed a slight increase in activity last month but not as much as economists had expected, fuelling the belief that growth is slowing.
The pound traded as low as US$1.5273 against the US dollar, down slightly on the day and the lowest since June 9.
The euro was down slightly on the day at 73.80 pence but within sight of 74.23 pence from late August, the highest since May.
“Sterling is suffering position fatigue among investors. This may leave it more vulnerable to data undershoots near-term,” said Josh O’Byrne, currency strategist at Citi in London.
The CIPS/Markit construction Purchasing Managers’ Index (PMI) rose to 57.3 in August from 57.1 in July, indicating solid growth but below the 57.5 forecast in a Reuters poll and levels of more than 60 regularly reached in 2014.
Sterling has lost more than 3% on a trade-weighted basis in the last two weeks alone as investors have pushed back the timing of the first Bank of England (BoE) rate hike into next year.
Global volatility stemming from deteriorating markets in China and a darkening economic outlook for the world’s second largest economy could keep the BoE on hold for longer than thought only a few weeks ago.
The earliest sterling money markets are pricing in a move is around March/April next year.
Britain is still one of the fastest-growing economies in the developed world but that may not be sustainable given the weakness globally. In addition, UK inflation is virtually zero, making it more difficult for the BoE to justify higher rates.
Meanwhile, Bernama reported that the ringgit closed lower against the US dollar today in tandem with most regional currencies, weighed down by concerns on China’s slowing economic growth and weak factory data, said a dealer.
At 5pm, the ringgit was quoted at 4.2070/2150 against the greenback from 4.1620/1680 yesterday.
However, Inter-Pacific Research Sdn Bhd Head of Research Pong Teng Siew said the ringgit had stabilised from the recent drop, taking advantage of the recent substantial gains in crude oil prices.
“We don’t expect the ringgit to drop much further, but this would depend on the crude oil movement.”
The ringgit was also traded lower against other major currencies. It declined against the Singapore dollar to 2.9736/9803 from yesterday’s 2.9526/9588 and fell against the yen to 3.5096/5178 from 3.4741/4800 yesterday.
The local unit depreciated against the pound sterling to 6.4346/4477 from yesterday’s 6.3803/3920 and eased against the euro to 4.7455/7549 from 4.6927/6003 previously.