Sterling crumbles to record low, dollar soars on UK fiscal angst

content of the article

TOKYO – Sterling fell to a record low on Monday as traders rushed to the exits amid speculation that the new government’s economic plan will stretch Britain’s finances to the limit.

The British pound’s searing decline helped the safe-haven US dollar to a new two-decade high against a basket of key rivals.

content of the article

Sterling tumbled as much as 4.9% to an all-time low of $1.0327 before stabilizing around $1.05405, 2.9% below the previous session’s close.


It fell 3.6% on Friday as new finance minister Kwasi Kwarteng unveiled historic tax cuts funded by the biggest increase in borrowing since 1972.

advertising 2

content of the article

“Sterling is absolutely being hammered,” said Chris Weston, research director at Pepperstone.

“Investors are looking for an answer from the Bank of England. They say this is not sustainable.”

The euro also touched a fresh 20-year low against the dollar on simmering recession fears as the energy crisis stretches into winter amid an escalation in the Ukraine war. In Italy, too, an election at the weekend should lead to a right-wing alliance with a clear majority in parliament.

The dollar built on its recovery against the yen after the shock of last week’s currency intervention by Japanese authorities, as investors refocused on the contrast between a tightening Federal Reserve and the Bank of Japan’s insistence on sticking with massive stimulus judged

advertising 3

content of the article

The dollar index – whose basket includes sterling, the euro and the yen – hit 114.58 for the first time since May 2002 before falling to 113.73, 0.52% higher than at the end of last week.

Also Read :  Post Session Report :: Tuesday, October 18, 2022

“The poor situation in the UK is increasing support for the USD, which could turn higher again this week,” Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, wrote in a report.

“Should a sense of crisis emerge in the global economy, the USD could rise significantly.”

Europe’s common currency fell as low as $0.9528, last seen down 0.41% at $0.96545.

The dollar gained 0.39% to 143.95 yen, continuing its climb back towards a 24-year high of 145.90 on Thursday. It fell to 140.31 on the same day after Japan conducted yen buying intervention for the first time since 1998.

advertising 4

content of the article

On Monday, Japanese Finance Minister Shunichi Suzuki reiterated that authorities are ready to respond to speculative currency moves.

Elsewhere, the risk-sensitive Australian dollar slipped to $0.6487, its lowest since May 2020, and last traded 0.22% weaker at $0.6516.

The other commodity currency, the Canadian dollar, hit a new low of C$1.3625 per greenback, its weakest since July 2020.

Also Read :  Morning Bid: Dollar feeds on stress

China’s offshore yuan slipped to a fresh low of 7.1630 per dollar, its weakest since May 2020.

The People’s Bank of China announced on Monday that it will reinstate currency risk reserves on some futures contracts, a move that would make betting against the yuan more expensive to slow the pace of the recent depreciation.

(Reporting by Kevin Buckland, Editing by Shri Navaratnam and Sam Holmes)



Postmedia strives to maintain a vibrant but civilized forum for discussion and encourages all readers to share their views on our articles. Comments may take up to an hour to be moderated before they appear on the site. We ask that you keep your comments relevant and respectful. We’ve turned on email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update on a comment thread you follow, or when a user you follow comments follows. For more information and details on how to customize your email settings, see our Community Guidelines.

Source link