MW: Pound gains on BoE comments; dollar awaits Fed meeting
By Polya Lesova & Lisa Twaronite, MarketWatch
FRANKFURT (MarketWatch) -- The British pound rose against the U.S. dollar on Wednesday after an official from the Bank of England suggested that the British economy may have grown more in the fourth quarter than was initially estimated.
The greenback was little changed against other major currencies, as traders awaited the U.S. Federal Reserve's monetary-policy statement, which is due this afternoon.
The dollar index (DXY 78.42, -0.01, -0.01%) , which measures the greenback against a trade-weighted basket of six other major currencies, recently traded at 78.414, compared with 78.443 late Tuesday.
The pound gained 0.5% to $1.6229, after earlier falling to an intraday low of $1.6106.
"The incentive for today's move is both speculation that the U.K. economy is somewhat stronger than implied by yesterday's official Q4 GDP data and hawkish comments from [the] BoE's Sentance," said Jane Foley, research director at Forex.com, in a note to clients.
Andrew Sentance, a member of the Bank of England's monetary-policy committee, said Wednesday it will be difficult to keep inflation on target given the British pound's depreciation against other major currencies, according to a report by Dow Jones Newswires.
Sentance also said that business surveys and other data suggest that the British economy expanded more in the fourth quarter of 2009 than the Office for National Statistics estimated. The ONS said Tuesday that U.K. gross domestic edged up 0.1% in the fourth quarter compared with the previous quarter.
Also, Sentance said that Britain will likely avoid a so-called double-dip recession, according to Dow Jones.
Currency traders are awaiting data on U.S. new-home sales for December as well as a statement from the Fed, which is expected to leave the federal-funds rate unchanged. The focus will instead be on the central bank's economic outlook and comments about its mortgage-debt buying plans. See preview on Fed meeting.
The euro was virtually unchanged at $1.4079 in recent trading, while the dollar edged down 0.1% to 89.53 Japanese yen. Earlier, the greenback fell as low as 89.11 yen according to FactSet data - its lowest point since mid-December.
The dollar firmed versus major counterparts Tuesday, touching its highest level in more than a month, on reports that China wanted to rein in bank lending and news that Japan's debt rating could be downgraded.
