The British pound fell to its lowest level against the dollar



CNN Business

The British pound fell It hit a new record low against the US dollar at $1,035 on Monday, down more than 4%.

The drop came as trading opened in Asia and Australia on Monday, extending its 2.6% decline from Friday – and spurring expectations that the pound could fall to parity with the US dollar in the coming months.

The Unprecedented decline in currency rates Following UK Treasury Secretary Kwasi Quarting’s announcement on Friday that the UK will impose its biggest tax cuts in 50 years at the same time as it boosts spending.

New fiscal measures to cut taxes, which include scrapping plans to raise corporate taxes and lowering maximum bonuses for bankers, have been criticized as “choke economics” by the opposition Labor Party, and even members of the chancellor’s Conservative Party. Ceremony.

Former Conservative chancellor Lord Ken Clark criticized the tax cuts on Sunday, saying they could lead to a crash in the pound.

“I’m afraid this is something that is usually tried in Latin American countries without success,” Clark said in an interview with BBC Radio.

The British pound was affected by a series of weak economic data, but also the sharp rise of the US dollar, which is a safe investment that sees inflows in times of uncertainty.

The euro also hit a 20-year low of 0.964 per dollar.

But the UK’s economic outlook means that the pound is suffering the most, in the face of a disastrous energy crisis and the highest inflation among the G7 nations.

The previous record low of the British pound against the US dollar was 37 years ago on February 25, 1985, when one pound was equal to $ 1.054.

“If there is any escalation of the war in Ukraine … we will see a further sharp drop in the pound as well as the euro,” said Clifford Bennett, chief economist at ACY Securities, an Australian brokerage.

“No one should underestimate the crisis that the whole of Europe is experiencing at the moment, and the pound is much weaker than most other countries,” he said.

The US dollar’s rally also dragged the major Asian currencies lower on Monday.

The Chinese yuan fell 0.5% in the internal market to its lowest level in more than 28 months. The offshore yuan fell 0.4%.

Rapid declines prompted the People’s Bank of China to A 20% risk reserve has been imposed on banks’ foreign exchange forward sales to customers as of Wednesday. The move will make it more expensive for traders to buy foreign currencies via derivatives, which could slow the yuan’s decline.

Elsewhere in the region, the Japanese yen fell 0.6% against the dollar to 144. Last Thursday, the Bank of Japan intervened in the currency market For the first time since 1998 to support the yen. Yen rebounded a bit after the intervention, but quickly resumed sliding.

The Korean won also fell 1.6% on Monday against the dollar, falling below the 1,420 level for the first time since 2009.

Stock markets in the region were in turmoil on Monday, after US stocks sold out on friday With recession fears growing.

South Korea’s Kospi fell 2.7%, and Japan’s Nikkei 225 index

(N225)
It fell 2.4%, and the Australian S&P/ASX 200 index fell 1.4%. China’s Shanghai Composite Index fell 0.1%.

“Sentiment towards risk has been hit hard by the latest federal policy actions and guidance,” DBS analysts said in a research report on Monday.

Federal Reserve on Wednesday Approved the third consecutive rise of 75 basis points In a strong step to address the severe inflation that the US economy is suffering from.

DBS analysts said that even without the Fed’s action, Europe is eyeing a slump due to the war in Ukraine, and China is eyeing “largely weak growth dynamics” due to a variety of domestic factors.

“In addition to the sharp drop in US dollar liquidity and sharply higher US interest rates, the global economic outlook looks especially precarious,” they added.

See also  Chongqing Covid outbreak: Chinese city 'extended to the limit' as millions wait in line for tests in sweltering temperatures

Leave a Reply

Your email address will not be published.