- As traders flee, the value of the pound falls to an all-time low.
- Because of the pound’s collapse, the dollar has reached a new two-decade high against major peers.
- Sterling falls as much as 4.9% to $1.0327, its lowest level ever.
The British pound steep slide boosted the US dollar’s safe-haven reputation and new two-decade high against a basket of foreign competitors.
According to TOKYO, sterling plummeted to a record low on Monday as speculators deserted the market over fears that the next government’s economic agenda will stretch Britain’s finances beyond repair.
Sterling dropped as much as 4.9% to a record low of $1.0327 before finishing at $1.05405, 2.9% lower than the previous session’s close.
On Friday, it plunged 3.6% as new Finance Minister Kwasi Kwarteng announced extraordinary tax cuts supported by the highest increase in borrowing since 1972. See More
Sterling is taking a battering, according to Chris Weston, head of research at Pepperstone.
Investors are awaiting a response from the Bank of England. They say that this is not sustainable.
As the oil crisis persists and the situation in Ukraine worsens, the euro has fallen to a fresh 20-year low versus the dollar. Following a weekend election, a right-wing alliance was projected to secure a solid majority in Italy’s parliament. See More
Following the shock of last week’s currency intervention by Japanese authorities, the dollar reinforced its gains against the yen as investors shifted their focus back to the gap between a hawkish Federal Reserve and the Bank of Japan’s willingness to maintain massive stimulus.
Before falling to 113.73, 0.52% higher than the previous week’s close, the dollar index, which includes the pound, euro, and yen, reached 114.58 for the first time since May 2002.
According to Commonwealth Bank of Australia’s head of international economics, Joseph Capurso, the UK’s poor performance exacerbates support for the USD, which may rise this week.
If there are indicators of a global economic disaster, the value of the US dollar might skyrocket.
The European Union’s single currency plummeted as low as $0.9528 before closing down 0.41% at $0.96545.
The dollar rose 0.39 percent to 143.95 yen, closing in on the 24-year high of 145.90 set on Thursday. On the same day, it plummeted to 140.31 following Japan’s first yen-buying intervention since 1998.
Japan’s finance minister, Shunichi Suzuki, stated on Monday that the government was prepared to respond to currency speculation.
The risky Australian dollar fell to $0.6487, its lowest since May 2020, and was last trading 0.22% down at $0.6516.
The Canadian dollar, a commodity currency, has dropped to a new low versus the US dollar, C$1.3625, its lowest level since July 2020.
China’s offshore yuan plummeted to a new low of 7.1630 per dollar, its lowest level since May 2020.
The People’s Bank of China stated on Monday that it will reinstate foreign currency risk reserves for some futures contracts in order to slow the rate of recent devaluation. The cost of betting against the yuan would rise as a result of this action.
