USD is at its highest level in 20 years and the sterling is under pressure

Nervous financial markets pushed the dollar to a two-decade high on Wednesday, Sept. 28, as rising interest rates around the world fueled recession fears. The pound slid further after recent warnings about Britain’s tax cut plans.

The US dollar index rose by about 0.5% to a new record level at 114.78, and its upward trend supported the continuous rise in the US Treasury yields for ten years, which reached 4% for the first time since 2010, and recorded 4.013%.

The dollar gained broadly, with the euro dropping 0.43% to $0.956. The pound, which is under a lot of pressure, fell by 0.7% to $1.0678. The Australian dollar, particularly sensitive to investor sentiment fluctuations, fell by 1%.

The Federal Reserve is leading the global fight against rising inflation and has recently become even more hawkish and pointed to further interest rate increases to add to the big moves of the past few months.

The continued rise in borrowing costs increased fears of a global recession, which fueled the rise in bond yields worldwide.

However, the dollar’s rise against sterling was also affected by British domestic factors, after the British government announced last week a plan to cut taxes and increase borrowing.

This decreased sterling to $1.0327 on Monday, a record low, after settling near the $1.1300 level ahead of the UK’s budget announcement last week.

In Asia, the yen reached 144.53 per dollar, still near its lowest level in years even after Japan intervened to support the fragile currency last week.

The offshore Chinese yuan fell to 7.249 per dollar, its lowest level since this data began to be available in 2011.