Pound pauses after UK fiscal easing, yen slumps to 32-year low

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LONDON, Oct 18 (Reuters) – The pound sterling paused on Tuesday, after jumping nearly 2% the day before, as improving investor sentiment sent the U.S. dollar tumbling against its major peers at following the UK’s dramatic U-turn on its fiscal plans.

The Bank of England (BoE) is expected to further delay the start of its sales of billions of pounds of government bonds to help stabilize government bond markets after Britain’s ‘mini-budget’ failed, it said. reported the Financial Times. Read more

On Monday, new Finance Minister Jeremy Hunt scrapped most of Prime Minister Liz Truss’ economic plan and slashed his energy support package, making a historic policy U-turn to try to stem a loss of investor confidence since that former finance minister Kwasi Kwarteng on September 23 announced a series of tax cuts without any details on how they would be paid for.

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After Monday’s nearly 2% rally, the pound was down 0.1% against the US dollar at $1.1340 at 0815 GMT.

“The BoE’s plan to delay quantitative tightening is another step in a coordinated effort by the UK authorities to stabilize markets – and even if it just throws the box on the road, it will provide short-term relief. markets which have experienced a series of shocks since the Truss administration came to power,” said Charu Chanana, market strategist at Saxo Markets in Singapore.

Improved risk sentiment supported the euro at $0.9872, its highest since Oct. 6, with lower energy prices also supporting the single currency. A key European gas price benchmark fell to its lowest level in four months.

“The euro/dollar fell below parity at the end of August, largely due to the negative terms of trade shock linked to the rise in energy prices. reverse temporarily, as gas prices in Europe fall sharply due to warmer weather and European governments have largely met their gas storage targets,” said Chris Turner, global head of markets at ING in London.

The euro was last up 0.1% at $0.9855.

Meanwhile, the weakening dollar brought little respite to the battered Japanese yen, which was trading near a 32-year low against the dollar at 149 yen, emphasizing the main barrier psychological of 150.

The dollar-yen pair strengthened by around 3% in October, hampered by traders’ nerves following the Bank of Japan’s first yen-buying intervention since 1998 on September 22.

Japanese Finance Minister Shunichi Suzuki said following the recent Group of Seven meeting that “there has been no discussion of coordinated actions that could be taken” regarding currency volatility. Read more

The US dollar index – which measures the greenback against six major peers including the pound, euro and yen – fell 0.1% to 111.99, after hitting its lowest level since October 6.

News from Britain saw the risk-sensitive New Zealand dollar, already buoyed by stronger-than-expected consumer inflation data, extend its push, up 1% to $0.5691. Consumer inflation in New Zealand continued to hover near three-decade highs in the third quarter, boosting bets for further rate hikes.

The Aussie also found new life thanks to developments in Britain, having received a short-lived boost from the minutes of the last Reserve Bank meeting which showed that the decision to slow the pace rate hikes was “precisely balanced”.

Central bank Deputy Governor Michele Bullock reinforced that when she said in a speech on Tuesday that the RBA can keep pace with tightening global peers. Read more

The Aussie strengthened 0.1% to $0.62990.

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Reporting by Joice Alves, Additional reporting by Kevin Buckland. Editing by Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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