Sterling gains against dollar as bulls return

STERLING is undervalued, according to almost a quarter of fund managers, marking a dramatic turnaround in optimism on the beleagured currency.

The finding from Bank of America Securities-Merrill Lynch’s global monthly fund manager survey marks a rise from April when 17 per cent saw the pound as undervalued.

The optimism comes as strategists predict a resurgence in the pound against both the dollar and the euro.

“The pound fell so sharply against the dollar that it is due a pullback, particularly when both countries are following similar policies such as quantitative easing,” says Stephen Gallo, head of market analysis at Schneider FX.

“The UK economy is still in a bad way. But currency markets are taking the view that sterling will outperform both the dollar and euro going forward,” added Mark O’Sullivan, director of dealing at Currencies Direct.

Yesterday, the pound continued to surge hitting $1.5650 – its strongest level so far this year against the dollar. The pound has now risen six per cent against the dollar this month, putting it on course for its biggest monthly gain since 1993.