* BoE could be first major central bank to tighten policy
* Euro hurt by Coeure's comments at Reuters Summit
* Dollar gets some second-day lift from Yellen
By Michael Connor
NEW YORK, Feb 12 The British pound moved up to a
two-week high against the dollar on Wednesday after the Bank of
England hiked economic growth forecasts and hinted Britain may
raise interest rates next year.
Prospects of a rate hike in the second half of 2015 also
prompted investors to buy sterling against currencies like the
euro, the yen and the Swiss franc
"It's a sterling day," said David Gilmore, partner at FX
Analytics in Essex, Connecticut.
But the dollar also rose broadly, in part because new
Federal Reserve Chair Janet Yellen on Tuesday showed no sign in
congressional testimony of slowing a wind-up of a massive
bond-buying stimulus program now running at $65 billion monthly.
"It made it seem like the Fed is no longer data dependent on
tapering," said Douglas Borthwick, managing director at
Chapdelaine Foreign Exchange in New York. "The market had been
hoping she might be more dovish."
Steady cuts in the Fed's quantitative easing campaign, like
the two $10 billion reductions already taken, suggest increases
in U.S. interest rates are likely to be sooner rather than
later, Borthwick said. Higher U.S. rates would lift demand for
The euro fell more than 1 percent against sterling and was
softer against the dollar, in part because of Yellen's
testimony, Borthwick said.
Sterling jumped to a two-week high of $1.6587, up
0.8 percent on the day, and well above the $1.6480 registered
before the BoE said interest rates could start rising from
record lows in little more than a year.
"The BoE seems to become the first major central bank, bar
the Reserve Bank of New Zealand, to hike interest rates," said
Chris Turner, chief currency strategist at ING. "We are
expecting a rate hike in February 2015, so in the short term
sterling looks good, especially against the euro."
Against the dollar, the euro was down 0.33 percent at
$1.3592 ; against the yen, it was down 0.50 percent at
The euro was also hurt by weak economic data and comments
from ECB Executive Board member Benoit Coeure, who told a
Reuters Summit the bank was "very seriously" considering a
negative deposit rate. The rate, at which banks park surplus
funds with the central bank, is now zero percent.
Industrial output for the euro zone in December fell 0.7
percent on the month, after a downwardly revised 1.6 percent
rise in November and much sharper than a 0.3 percent fall
The euro's losses helped lift the dollar index 0.06 percent
to 80.699, pushing it above a two-week low of 80.448
after being as high as 80.831.
Earlier, the Australia and New Zealand dollars hit one-month
highs as improved Chinese trade data eased concerns about growth
in the world's second-biggest economy and bolstered demand for
China's trade performance beat forecasts in January as
import growth hit a six-month high, which soothed recent fears
that the world's second-largest economy is slowing down. China
is Australia's biggest export market.
The Aussie dollar hit a high of $0.9068, its
strongest level since Jan. 13, before easing to trade at
$0.9039, flat on the day.
The New Zealand dollar also retreated in late trade
after hitting a one-month high of $0.8370 and stood nearly
unchanged for the day at $0.8320 in New York.