GBP is at its lowest level, USD benefits from economic fears in Britain

Sterling fell to a record low on Monday as traders scrambled to sell it amid speculation that the new government’s economic plan in London would squeeze public finances to the limit.

The sharp drop in sterling helped the dollar index, which measures the performance of the US currency against six major currencies, including sterling and the euro, to its highest level in 20 years.

The pound fell by 4.9 percent to its lowest level ever, recording $1.0327, before settling around 1.05405, a level lower than the closing of the previous session by 2.9 percent.

It fell 3.6 percent on Friday, when new Finance Minister Kwasi Quarting unveiled historic tax cuts funded by the largest increase in borrowing since 1972.

The euro also touched its biggest drop in 20 years against the dollar, amid fears of an economic recession as the energy crisis continues and winter approaches, amid an escalation in the Ukraine war. Sunday’s election in Italy is also expected to produce a right-wing coalition with a clear majority in parliament.

The Dollar continued to rebound against the Yen after the shock of the Japanese authorities’ intervention in the exchange market last week, as investors refocused their attention to the contrast between the Fed’s tightening policies and the Bank of Japan’s insistence on sticking with massive stimulus measures.

The dollar index reached 114.58 for the first time since May 2002, before falling back to 113.73, up 0.52 percent from the close of trading last week.

The euro fell to 0.9528 dollars, and fell in the last trading by 0.41 percent at 0.96545 dollars.

The dollar rose 0.39 percent to 143.95 yen, extending its rally back towards a peak reached on Thursday when it reached for the first time in 24 years at 145.90 yen. It fell to 140.31 on the same day after Japan intervened by buying the yen for the first time since 1998.

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

The offshore Chinese yuan fell again to 7.1630 per dollar, its weakest since May 2020.