Pound hits 9-month low on political worries

SYDNEY (BestGrowthStock) – Sterling fell to a nine-month low against the U.S. dollar and dived to a one-year low on the yen on Monday, on the back of growing political uncertainty as an opinion poll pointed at the risk of a hung parliament.

Traders said that could undermine an already fragile economic recovery, prompting many to add to short positions in the pound. It dropped to as low as $1.5129, from $1.5235 late in New York on Friday. It has shed more than 6 percent this year against the U.S. dollar.

Sterling also fell to its lowest in a year on the yen, dropping to as low as 134.50 yen, its weakest since March 2009. An opinion poll out on Sunday suggested the ruling Labour Party could remain the biggest party after this year’s election but without a majority in parliament.

“The latest concerns about the pound are from the likelihood of a hung parliament,” said Richard Grace, chief currency strategist at Commonwealth Bank, Sydney. “The U.S. dollar’s gains are also adding to the weakness in the pound.”

Sterling was also undermined by news the UK’s Prudential (PRU.L: ) would buy the Asian unit of American International Group (AIG.N: ) for $35 billion, including $25 billion in cash. That could imply a need to swap pounds into dollars.

The U.S. dollar index (Read more about the global trade. ) (.DXY: ) edged higher in Asia, rising to 80.42, supported at the margins by improving U.S. economic data. U.S. gross domestic product expanded at a 5.9 percent annual rate, faster than the 5.7 percent pace estimated earlier.

This week the focus will be on U.S. jobless data, due on Friday, and which will give more clues on consumer spending. Forecasts are for a loss a loss of 50,000 jobs in February, with the jobless rate seen ticking back up to 9.8 percent.

Also due this week are a slew of major central bank meetings, from Australia to Canada.

The European Central Bank is also scheduled to meet and while rates are expected to remain unchanged there, attention will be on any mention of the continent’s highly indebted trouble spots, like Greece, Portugal, Spain and Ireland.

The euro was firmer at $1.3630, up from $1.3612 late on Friday when it gained 0.4 percent. It was boosted by speculation that euro zone policymakers were close to stitching up a deal to bailout debt-laden Greece.

Traders said despite the bounce, sentiment on the single currency remained negative. Indeed, data from the Commodity Futures Trading Commission showed net short euro positions rose to 71,623 contracts in the latest week to February 23, a fresh record, up from 59,422 contracts in the prior week dollar.

IMM data shows long U.S. dollar positions at highest since Sept 2008 while short euro positions are a record high.

Speculators also added to long positions in the U.S. dollar and the yen,. The yen, pared some of its gains, easing to 89.03 per dollar from 88.86 late on Friday in New York.

Meanwhile, the Australian dollar was firm at $0.8985, on renewed speculation that the Reserve Bank of Australia is likely to lift the cash rate to 4 percent on Tuesday. Markets are pricing in a 60 percent chance of a 25 basis points move, which could boost the Aussie.

Stock Market Today

(Editing by Wayne Cole)

Pound hits 9-month low on political worries