Sterling fell broadly on Monday, hitting a five week low against the dollar and weakening versus the yen as risk-averse investors cut exposure to so-called carry trade positions.
Although stock markets regained some poise from hefty losses registered last week, worries over liquidity in global credit markets refused to lie down - leaving investors on FX markets wary of borrowing in low-yielding units like the yen to buy higher return assets including sterling. UK housing and producer price data released earlier in the day had little impact as UK investors took their lead from the global environment.
"The economic data hasn't had a significant bearing," Steve Barrow, currency strategist at Bear Stearns said. "What's moving the market is the fear and concern the market has about liquidity, what central banks are doing and how the market is responding to that," he said.
By 1428 GMT sterling had fallen half a percent on the day to $2.0128, having hit a low of $2.0085 - last seen on July 6. The pound was also down against the yen at 238.41 yen.
The euro was flat at 67.70 pence. UK producer price data released earlier showed British firms' costs unexpectedly fell in July, while factory gate prices rose. Other data showed UK house prices rose 12.1 percent year-on-year in June compared with a revised 10.8 percent increase in May. Analysts said some impact on the pound might come from Tuesday's release of consumer price index data.
"The CPI report will be key, the market is assuming there will be more downside from inflation and if we do that then we are likely to see the pound down," Barrow said.
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