Strengthening economic conditions in the UK have contributed to the pound outperforming the majority of major currencies in the past year, according to latest research from Lloyds Bank Private Banking.
During the last 12 months the pound increased in value against 42 of the 74 currencies analysed.
Ten of the 74 currencies surveyed have declined in value by over 10% against sterling since December 2013, with economic problems in Venezuela, Ukraine, Russia and Argentina resulting in substantial currency falls.
For the second successive year, the Venezuelan bolivar has recorded the largest decline against the pound, falling by 83%. The South American country’s currency is under pressure due to high inflation, which recently topped 60%. As a major oil producer, the fall in oil prices has also led to its currency’s problems.
The Ukranian hryvnia (-77%) and the Russian rouble (-52%) have been the next biggest fallers. Both currencies have been hit hard by the situation in the Ukraine. The rouble has also suffered as a consequence of the resulting economic impact and the decline in oil prices has put pressure on the country’s balance of trade. The Argentine peso has been another major loser against sterling, falling in value by 33%.
Richard Musty, International Private Bank Director at Lloyds Bank, says: "The relative strength of the UK economy has been a key factor driving the increase in value of the pound against the majority of currencies during 2014, which has been good news in terms of helping to keep UK inflation under tight control.
“Sterling’s gains have been good news for many overseas travellers from the UK, including those going to Norway, Sweden and euro-zone countries. They have, however, been less beneficial for many UK exporters who have found it more difficult to compete in a number of key export markets."
The Norwegian krone and the Swedish krona have also recorded significant declines against sterling – both declining by 10% over the past year. The Norwegian currency has suffered as a result of the fall in oil prices which has heightened concerns about the country’s economic outlook.
The Pakistani rupee (10%) – the only currency to rise by 10% or more – and the Libyan dinar (8%) are the top performing currencies against the pound over the past year; followed by the Trinidad & Tobago dollar and the Indian rupee (both up by 5%).
Amongst currencies in the G20, the Russian rouble and the Argentine peso have seen the biggest falls against the pound over the past year. The Japanese yen (-12%) and the euro (-6%) have been the next biggest losers against the pound. These falls have reflected general weakness in both the Japanese and Euro-zone economies. The yen, for example, has fallen to a seven year low against the US dollar.
The US dollar has recorded the second biggest rise – behind the Indian rupee – against sterling amongst the G20 currencies, gaining 4% over the past 12 months. The dollar has generally strengthened on the currency markets as a result of relatively strong economic data over the past year. The Chinese yuan has also recorded a modest rise against sterling (3%).