Pound falls to five-month low against dollar
Sterling was subdued near five month lows against the dollar, as investors bought safe-haven currencies with risk appetite broadly suffering on mounting worries about the European debt crisis ahead of a key Greek vote on reforms.
Sterling was also hurt by brewing speculation over whether the Bank of England could resort to more monetary stimulus. Speculators have already cut long positions in sterling and in the latest week to 21 June, they were running net short positions..
Sterling was down 0.1 per cent at $1.5942 with traders expecting more selling to emerge, which could push it to test its five-month low of $1.5913 hit in Asia. Option expiries at $1.59 and talk of a large dollar-denominated corporate dividend payment could, however, lend some support.
“There is talk of a large dividend transaction, although we suspect the amount will be much smaller,” said a trader. “It could trigger a short squeeze, but every uptick will be seen as an opportunity to sell sterling.”