Yuan falls to 9-month low after China rate cut, sterling rises after jobs data
By Joice Alves and Samuel Indyk
LONDON (Reuters) — Sterling rose on Tuesday after data showed British basic wages grew at a record pace, adding to the Bank of England's inflation worries, while the yuan sank to a nine-month trough after China's central bank unexpectedly cut key policy rates.
In contrast, the Russian rouble gave up early gains after Russia's central bank lifted its key interest rate by 350 basis points to 12% at an emergency meeting to try and halt the currency from weakening past 100 to the dollar after a public call from the Kremlin for tighter monetary policy.
The pound was last 0.2% higher at $1.2705, after rising as high as $1.2731 following data showing British wages excluding bonuses were 7.8% higher than a year earlier in the three months to June. That represented the highest annual growth rate since comparable records began in 2001.
The UK unemployment rate, however, unexpectedly rose to 4.2% from 4.0%, but money market traders still expect the Bank of England to raise rates by at least 25 basis points next month on worries high pay growth will lead to second round effects on inflation.
«BoE Sep rate hike bets have jumped… providing support for the GBP,» said Scotiabank chief FX strategist Shaun Osborne.
CHINESE SURPRISE
Elsewhere, the dollar gained over 0.5% against the offshore yuan to a 9-month high of 7.3212 as the People's Bank of China (PBOC) cut its rates in an effort to boost a sputtering economic recovery.
The yuan briefly bounced back as major state-owned banks were seen selling dollars to support the local currency.[CNY/]
The dollar index, which measures the currency against six peers including the euro and sterling, dropped 0.1% to 103.04 after hitting a 1-1/2-month high at 103.46
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