/cloudfront-us-east-2.images.arcpublishing.com/reuters/Q7CI6HC75RPLZNWXNVVTTQ5Q34.jpg?ssl=1 "Sterling crumbles to record low, dollar soars on UK fiscal angst")
TOKYO, Sept 26 (Reuters) – The pound sterling fell to a record low on Monday as traders rushed for the exits on the belief that the new government’s economic plan would stretch Britain’s finances to the limit.
The dizzying fall in the pound helped the safe-haven US dollar hit a new two-decade high against a basket of major peers.
The pound fell 4.9% to an all-time nadir of $1.0327, before stabilizing around $1.05425, 2.9% below the previous session’s close.
It fell 3.6% on Friday when new finance minister Kwasi Kwarteng unveiled historic tax cuts funded by the biggest increase in borrowing since 1972. read more
“Sterling is getting hammered,” said Chris Weston, research manager at Pepperstone.
“Investors are looking for a response from the Bank of England. They say it’s not sustainable.”
The euro also hit a fresh 20-year low for the dollar on simmering recession fears, as the energy crisis drags on into winter amid an escalating war in Ukraine. A weekend election in Italy was also expected to propel a right-wing alliance to a clear majority in parliament. Read more
The dollar benefited from its recovery against the yen after the shock of last week’s monetary intervention by the Japanese authorities, with investors again focusing on the contrast between a hawkish Federal Reserve and the insistence of the Bank of Japan stick to massive stimulus.
The dollar index – whose basket includes the pound sterling, the euro and the yen – reached 114.58 for the first time since May 2002 before falling back to 114.02, 0.78% more than at the end of last week.
“The strength of the dollar was largely due to the strong selling of the pound,” said Saktiandi Supaat, regional head of FX research and strategy at Maybank.
“It’s more of a kind of risk,” Supaat added. “Global recession fears have actually intensified and widened quite widely.”
Europe’s common currency slipped as low as $0.9528 and last traded 0.71% lower at $0.9623.
The dollar added 0.54% to 144.175 yen, continuing its rally towards Thursday’s 24-year high at 145.90. It fell to 140.31 on the same day after Japan intervened to buy yen for the first time since 1998.
On Monday, Japanese Finance Minister Shunichi Suzuki repeated that the authorities were ready to react to speculative movements in currencies. Read more
Elsewhere, the risk-sensitive Australian dollar fell to $0.64865, its lowest since May 2020, and last traded 0.6% lower at $0.6491.
Another base currency, the Canadian dollar hit a new low at C$1.3636 per greenback, its weakest since July 2020.
The Chinese offshore yuan slipped to a fresh low of 7.1728 per dollar, its weakest since May 2020.
On land, the yuan also hit a 28-month low at 7.1690, just below the day’s downside trading limit set by the People’s Bank of China.
The new lows came even as the central bank announced on Monday that it would restore currency risk reserves for some futures contracts, a move that would make betting against the yuan more expensive and slow the pace of its recent depreciation.
