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The pound-dollar exchange rate rose to a new two-month peak at 1.3622 on Friday, the highest level since February 17.
Friday’s gains build on Thursday’s solid 1% advance, which was linked to widespread USD weakness linked to significant USD selling by Japanese authorities.
It’s confirmed that Japan intervened in the FX market on Thursday, buying yen in order to try and stop a steady trend of depreciation. Estimates suggest Japan’s Ministry of Finance sold between US$60-80BN equivalent.
That’s a significant tranche of dollars to offload, which inevitably has cross-currency implications, boosting the likes of GBP/USD, EUR/USD and AUD/USD.
“The dollar trades weaker with cable above $1.36 to hit its best since February,” says Neil Wilson, UK Investor Strategist at Saxo.
With market volumes likely to be unusually low due to many markets being closed for ‘May day’ holidays, and the UK looking forward to a long weekend, these levels should hold into early next week.