The British pound fell for a fifth day, weighed down by a loosening monetary policy, as New Zealand’s dollar retreated with commodities. Asian shares climbed to a one-year high as Chinese inflation data added to signs of stabilization in the world’s second-largest economy.
Sterling slipped to a four-week low after the Bank of England stepped up bond purchases this week. The currencies of commodity-exporting nations weakened as oil sank below $43 a barrel and copper slipped to a four-week low. Taiwan’s dollar gained as foreigners boosted holdings of the island’s stocks. European equities fluctuated as Asia’s advanced for a fourth day. India’s bonds rose following a monetary policy review, while China’s benchmark yield dropped to a seven-year low.
The pound sank 0.4 percent versus the dollar as of 8:32 a.m. London time, contributing to a five-day loss of 2.7 percent. As well as cutting interest rates for the first time since 2009, the Bank of England on Aug. 4 exceeded economists’ expectations with an announcement that it would increase its gilt-purchase program by 60 billion pounds ($78 billion) to 435 billion pounds, starting this week.
“We could see some short-term weakness in the pound,” said Janu Chan, a senior economist at St. George Bank Ltd. in Sydney. “It was an extensive stimulus program that the BOE announced. The economy has been hit in the short-term, and could face a minor recession.”
Among the commodity currencies, South Africa’s rand and the kiwi weakened 0.3 percent. Investors are certain New Zealand’s central bank will reduce its benchmark interest rate on Thursday by at least a quarter point to 2 percent, a record low, and most expect it will deliver another cut to 1.75 percent by November, swaps data show.
Taiwan’s dollar gained as much as 0.4 percent to its strongest level in a year after trade data released Monday showed exports increased in July for the first time in 18 months. Global funds boosted their holdings of the island’s shares by about $400 million in the first two trading sessions of this week, according to data compiled by Bloomberg.
A series of better-than-expected US economic data in recent weeks has helped drive global equities to their highest level in almost a year and spurred expectations that the Federal Reserve will raise interest rates. The prospect of a hike in borrowing costs is bolstering demand for dollars at a time when monetary policy is being loosened across much of Asia and Europe.
“There has been a reasonable spike for commodities over the past couple of days and metals may be just due a correction given the dollar moves,” said David Lennox, resources analyst at Fat Prophets in Sydney.
The Reserve Bank of India left interest rates unchanged on Tuesday and Governor Raghuram Rajan, whose term ends early next month, said the authority’s policy stance remains accommodative. China’s factory-gate deflation eased for the seventh straight month in July, signaling improving conditions for manufacturers in an economy that expanded last year at the slowest pace in more than two decades. Germany reported a smaller increase in June exports than economists forecast, while the UK has figures due on trade and industrial output.