Belfast Telegraph

Currency markets to remain highly volatile, says new survey

By Clare Weir

Continuing turbulence in foreign exchange markets could impact Northern Ireland businesses, requiring them to take a closer look at currency risk and exposure, according to a new survey.

Forecasting data released this week by Northern Bank indicates a high degree of currency volatility predicted for the next six to 12 months.

The report highlights that the euro is set to fluctuate against sterling between 0.82 pence and 0.90 pence per euro over the next six months.

The forecasts also indicate that, whilst in the short to medium term sterling may remain relatively stable against the dollar around the mid 1.50s, the longer term forecast points to sterling strengthening towards $1.74 during the second half of 2011, with the outlook for the US economy remaining uncertain.

Brian Telford, head of markets at Northern Bank, said that the recent uncertainty created as a result of European debt woes has unnerved currency markets and evolving economic conditions in Europe should be a key consideration for businesses.

"There is a high risk that UK growth projections will have to be revised down as the government debt rebalancing act impacts on the wider economy," he said.

"For the UK it's a strange dilemma. A strong, stable currency is desirable to underpin long-term economic stability but it is largely an export-led recovery, facilitated by a weaker pound.

"It seems certain, though, that whatever happens there will be further exchange rate volatility in the coming months and this can impact both import and export businesses in Northern Ireland in ways that they may not initially have foreseen.

"As a result, local businesses need to mitigate the risk and optimise the opportunities that exchange movements may provide."