Sterling falls against the majors as stock struggle to gain momentum

Sterling fell broadly on Tuesday against the euro as a five-day run ofstock market gains faltered. European stocks floundered and U.S. sharemarkets struggled to gain despite an unexpected surge in housingstarts. "Stocks weren't able to hold a rally and that left sterlingunder pressure," said Naeem Wahid, currency strategist at Bank ofScotland Treasury Services. However investors are mostly wary of marketshocks that could send them back into extreme risk-averse mode. "Wewill be largely driven by risk and risk matrix once again as we seesterling increasingly in the risk basket," said Jeremy Stretch, marketsstrategist at Rabobank in London. The GBP/USD is currently trading at$1.3925 as of 8:50am, GMT.

The yen traded near the weakest level against the euro this year afterthe Bank of Japan said it will step up purchases of government debt,encouraging investors to seek higher-yielding assets overseas. Thedollar low against the euro as Asian stocks extended a rally in globalequities, damping demand for the U.S. currency as a refuge from thefinancial turmoil. “Governments and central banks are taking variousmeasures which are supporting sentiment that the worst of the financialcrisis may be over,” said Yuji Saito, Societe Generale SA. “People whohad shunned risk are returning to the markets. This is causing sellingof the dollar and the yen.” The Bank of Japan said today after itstwo-day policy meeting ended that it will increase the amount ofgovernment debt it will buy to 1.8 trillion yen. The USD/JPY iscurrently trading 98.75 as of 9:05am, GMT.

The Australian dollar traded on a high as equities rallied, promptinginvestors to buy higher-yielding assets. Australia’s dollar touched thestrongest in two months versus the yen as stronger-than-forecast homestarts in the U.S. and increased spending by the Bank of Japan fueledoptimism the global economy may be stabilizing. “The Australian dollarlooks pretty solid with equities performing well,” said Paul Milton,chief foreign-exchange dealer at Societe Generale Australia Ltd. inSydney. “There seems to be firm selling interest around the 66.30 U.S.cents area, which might cap the Aussie in the short-term,” he said,using the currency’s nickname. The AUD/USD is currently 0.6595 as of9:10am, GMT.

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