Sterling bounced off a 13-year low against the yen on Friday, as the low-yielding unit's rally on global recession worry stalled after Japan's finance minister warned about extreme market moves. The yen's broad fall also helped the pound to build gains versus the dollar and euro after Japanese Finance Minister Shoichi Nakagawa said on Friday that the authorities must be ready to deal with big swings in markets.
"Overall the picture is still quite vulnerable for sterling. There are still risks on the horizon from the auto and banking sector in the US..the economic picture continues to deteriorate," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.
By 1531 GMT, the pound was up 2.5 percent at 141.22 yen having earlier hit its lowest since mid-1995 at 137.77 yen according to Reuters data. The pound was up 0.9 percent at $1.4863, while the euro fell to 84.57 pence. British finance minister Alistair Darling will unveil the government's economic stimulus package on Monday, believed to be worth 15 billion pounds, in his pre-budget report to parliament, in a bid to revive the domestic economy.
But the deal is seen providing little respite for the pound as the market has already priced in the move, Stannard said. "It (the stimulus) will probably have very little in way of lasting supportive effect for sterling. Once we see that announcement we are likely to see sterling coming back under pressure," he added.
Meanwhile, minutes released this week from the Bank of England's last rate-setting meeting showed policymakers considered slashing rates earlier this month by more than the 150 basis points ultimately delivered. Economists polled by Reuters say the BoE is certain to follow up its shock 1.5 percentage point chop with another 50 basis point easing in December as it tries to drag Britain out of recession.
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