The British sterling erased its Asian session's losses against other major currencies in early deals on Monday as European equities recovered after a report showed that Germany's business confidence unexpectedly improved for a fifth month in March.
Business confidence rose to 109.8 in March, the highest since July 2011, from the revised 109.7 level a month ago, survey data from the Munich-based Ifo institute revealed today. The index stayed above the expected reading of 109.5.
Meanwhile, the current conditions index remained at 117.4. Economists were expecting the index to fall to 117. The expectations index rose to 102.7 from 102.4 in February. The reading matched economists' expectations.
European shares are trading higher after the report, with the U.K. FTSE 100 index inching up 0.45 percent, France's CAC-40 index rising to 0.07 percent and Germany's DAX advancing to 0.62 percent.
The pound advanced to a 4-day high of 131.96 against the yen around 7:15 am ET, up by more than 1.45 percent from Friday's 10-day low of 130.04. The next upside target for the pair is seen around the 132.50/60 area.
Bank of Japan Governor Masaaki Shirakawa said over the weekend that an excessive focus on short-term inflation development may ultimately result in larger swings in the economy through correction of financial imbalances.
Most central banks of the advanced economies are now conducting policy with the aim of maintaining price stability in the medium to long term, he said at a conference sponsored by the Federal Reserve Board and the International Journal of Central Banking over the weekend.
Against the euro, the sterling reached as high as Friday's peak of 0.8338 before holding steady around 7:10 am ET. If the pound strengthens above this level, it could re-test the key 0.83 level in the near-term.
The Conference Board said in a report that the euro area leading economic index increased 0.8 percent to 105.2 in February, after rising 1.1 percent in January. Meanwhile, the coincident index, which measures the current economic situation, declined 0.1 percent to 102.4 in February. The index was flat in January.
The pound that slipped to a 2-week low of 1.4406 against the Swiss franc and a 4-day low of 1.5804 against the US dollar in the previous session reversed direction in early European deals on Monday. The pound rose as high as 1.4463 against the franc and 1.5897 against the dollar before holding steady around 7:20 am ET.
Looking ahead, the US pending home sales report for February and a speech by the Federal Reserve Chairman Ben Bernanke are due out in the New York session.
by RTT Staff Writer
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