Pound climbed higher, briefly, 0.5% on Wednesday, propelled by large purchase orders executed in a thin market. Renewed suggestions of a delay to Brexit also lifted sentiment on the currency.
The pound gained as much as 0.6% before falling back to $1.2914, up 0.2% on the day by 1200 GMT. It had been broadly trading flat for most of the London session earlier.
With six weeks to go before Brexit, markets have become more jittery on any Brexit- related news. Further, investors are wary of taking big bets before a firm resolution on the terms of Brexit is in sight.
As a result, turnover in the pound has declined compared to its rivals. Hedge funds and day traders tried to move the market by trading technical levels and Brexit headlines.
Against the euro, the pound gained 0.25 percent to 87.59 pence.
Implied volatility on the pound or expected swings in the British currency has fallen to more than a three-month low of nearly 10 vol compared to 14 vol in early-December.
START TRADINGForex – Commodities – Pound climbed higher on Brexit delay optimism
The New Zealand dollar rose after its central bank broke with the growing caution of the world’s major monetary-policy makers. This surprised traders who expected more dovish signals.
The New Zealand dollar was the stand-out performer after the neutral tone of the Reserve Bank of New Zealand’s policy announcement. The kiwi rallied as much as 1.7 percent to $0.6852 as traders rushed to cover short positions.
Elsewhere, investors chased riskier assets on signs of a detente in the U.S.-China trade war. That led to a pause in the dollar’s recent rally after an eight-day winning streak ended overnight. The dollar index was unchanged at 96.712. It stood at $1.1328 against the euro.
The Australian dollar, a barometer for global risk assets, added 0.3 percent to $0.7120.
The dollar rose 0.2 percent versus the yen to 110.72.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.