Pounds rebounds as focus shifts to Bank of England

The British pound rebounded on Tuesday, but its trading was mostly built on hope, profit taking and higher British yields, leaving traders anxious about the broader implications of its record decline.

With the dollar weakening, sterling rose by one percent in Asia to $1.0805, up nearly five percent from Monday’s low of $1.0327. The euro rose 0.5 percent and the Australian dollar rose 0.7 percent.

The BoE has made a somewhat soothing promise to monitor the markets and rally if necessary, and attention will be focused on the appearance of the central bank’s chief economist, Howe Bell, at the MPC meeting at 1100 GMT.

The dollar rose with expectations that US interest rates will remain elevated for a longer period, and with sudden moves such as pound traders. With the pound falling on Monday, the dollar jumped to new highs against the euro and many other currencies.

The dollar, which measures the greenback against a basket of six major currencies, hit a 20-year high at 114.58 and fell from that at 113.51 on Tuesday.

Japan intervened to support the collapsing yen for the first time in decades last week, which was enough to avert further losses for the yen for the time being.

The yen was last traded at 144.41 per dollar, steady even as the Bank of Japan pumped more cash into buying non-scheduled bonds to keep a cap on yields.

The euro hit a two-decade low of $0.9528, affected by the energy crisis and escalating war risks in Ukraine.

The Australian dollar hit a 2-1/2-year low on Monday and was set to rebound, with the Australian dollar up 0.6 percent at $0.6500 and New Zealand’s 1.2 percent at $0.5703.

The Chinese yuan hit a two-and-a-half year low on Monday and was broadly stable at 7.1589 against the dollar on Tuesday.