Pound Down on China’s New Requirements

China brought risk aversion once again to high levels before the end of this week’s session after it announced new lending requirements for banks, making the pound to trade towards another week of losses versus lower yielding currencies.

The pound was once again affected by a negative market sentiment internationally after China, for a second time this year, announced new lending reserve requirements for banks to provide loans, in order to control the growing inflation in the country, and consequently raising risk aversion in markets worldwide, which allowed refuge currencies like the U.S. dollar and the yen to post the sharpest gains versus the sterling this Friday. Bank of England‘s position to leave the possibility of resuming their asset-purchase program is affecting even further the outlook for the pound, as speculations that the economic recovery in the country and globally will not be as sharp as previously expected in 2010.

The situation in Europe and China’s loan restrictive policy is impacting the pound’s attractiveness, and the currency may experience new record lows specially versus the greenback and the yen as long as this scenario continues to decline the sterling’s attractiveness.

GBP/USD traded at 1.5629 as of 15:05 GMT from as high as 1.5732 hours earlier. GBP/JPY traded at 140.59 from 141.87.

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