* BoE could be first major central bank to tighten policy
* Euro hurt by Coeure's comments at Reuters Summit
* Aussie dollar sets 1-mth high on good Chinese trade
By Anirban Nag
LONDON, Feb 12 The British pound rose to a
two-week high against the dollar on Wednesday after the Bank of
England raised growth forecasts in its quarterly inflation
report and hinted it may raise interest rates next year.
A rate hike in the second half of 2015 probably would make
the BoE the first major central bank to raise rates, prompting
investors to buy sterling against a host of currencies like the
euro, the yen and the Swiss franc
Sterling jumped to a two-week high of $1.6558, up
0.6 percent on the day, and well above $1.6480 before the report
was released as investors brought forward expectations of the
first rate hike.
"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."
Sterling's gains against the euro helped the single currency
lose ground. Against the dollar, the euro was down 0.35 percent
at $1.3595 ; against the yen, it was down 0.7 percent at
The euro was also hurt by weak economic data and comments
from ECB Executive Board member Benoit Coeure that the bank was
"very seriously" considering a negative deposit rate, the rate
at which banks park surplus funds with the central bank. The
rate is now zero percent.
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 forecast..
The euro's losses lifted the dollar index, pushing it away
from a two-week low of 80.448. The dollar was also helped
by comments from new Federal Reserve chief Janet Yellen that the
Fed was committed for now to winding down its stimulus measures.
Lack of surprises in Yellen's first congressional testimony
underpinned global stocks. Upbeat trade data from China also
Earlier, growth-linked Australian and New Zealand dollars
hit one-month highs as the improved Chinese trade data eased
concern about growth in the world's second-biggest economy,
bolstering demand for riskier assets.
"In Yellen's testimony, continuity was emphasised, so that
will be positive for financial markets and should support risk,"
said Yujiro Gato, a currency strategist at Nomura in London.
"Undoubtedly, the upbeat Chinese data has helped the Australian
dollar. Investors have been short Aussie and some good
Australian data of late has led to a short-covering rally."
China's trade performance beat forecasts in January as
import growth hit a six-month high, confounding expectations
that the world's second-largest economy is slowing down. China
is Australia's biggest export market and the data boded well for
The Aussie dollar hit a high of $0.9068, its
strongest level since Jan. 13, before easing to trade at
$0.9040, still firmer on the day. The New Zealand dollar
outperformed, rising 0.3 percent to $0.8340, having hit
a one-month high of $0.8370.