SYDNEY — Sterling steadied on
Tuesday, but was perched above its record low only thanks to
soaring yields on British debt and the hope of a response from
policymakers or politicians, with its gyrations unnerving
markets to the benefit of the dollar.
On Friday and again on Monday the pound plunged,
finding a record low of $1.0327 as investors question Britain’s
economic gambit of unfunded tax cuts to spur growth.
It has bounced back to $1.0770, helped by the Bank of
England promising to monitor markets and hike if necessary, and
a bloodbath in gilts that has driven an incredible 100 basis
point rise for two-year yields in just two trading
BOE chief economist Huw Pill appears at a policy forum at
1100 GMT and his response to the turmoil will be closely watched
and analysts are wary of the currency’s recovery.
“We should expect the pound to remain volatile in the week
ahead as market participants await to see how policymakers in
the UK respond to the loss of confidence in the pound and
gilts,” said Lee Hardman, currency analyst at MUFG Bank.
“Without timely policy action this week cable could quickly
fall below parity.”
Sterling has dropped 5% since Thursday and 21% this year
against a backdrop of an ever stronger dollar.
The greenback has climbed as expectations solidify for U.S.
interest rates staying higher for longer, and as sudden moves
like the pound’s rattle traders. As the pound fell on Monday,
the dollar surged to new highs on the euro and many more.
“Everyone’s got this hope that the dollar is peaking and
peaking and peaking, but it’s just been far too premature,” said
Paul Mackel, global head of FX research at HSBC in Hong Kong.
“The Fed is firmly hawkish and global growth is weakening,
and you put those forces together alongside higher elements of
risk aversion – it’s all pointing to a strong dollar if not a
Japan intervened to support the battered yen for the first
time in decades last week, which has been enough to stave off
too many further losses for the yen, for now.
The yen last traded at 144.39 per dollar.
The U.S. dollar index, which measures the dollar
against a basket of six majors, hit a 20-year high of 114.58 and
was off that a bit at 113.87 on Tuesday.
The euro made a two-decade low of $0.9528 and is
weighed down by an energy crisis and new risks of war in Ukraine
escalating. It was a cent above that at $0.9626 in Asia trade.
The Aussie and kiwi hit 2-1/2 year lows on
Monday and were attempting bounces on Tuesday, with the Aussie
up 0.3% to $0.6479 and the kiwi up 0.8% to $0.5670.
China’s yuan also hit a 2-1/2 year low on Monday
and was steady at 7.1639 on Tuesday.
Currency bid prices at 0031 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
$0.9637 $0.9609 +0.31% +0.00% +0.9638 +0.9584
144.3500 144.7000 +0.00% +0.00% +144.7050 +0.0000
0.9911 0.9926 -0.12% +0.00% +0.9941 +0.9914
1.0772 1.0690 +0.79% +0.00% +1.0776 +1.0651
1.3699 1.3728 -0.17% +0.00% +1.3741 +1.3698
0.6481 0.6459 +0.36% +0.00% +0.6486 +0.6452
Dollar/Dollar 0.5678 0.5635 +0.76% +0.00% +0.5682 +0.5635
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook; Editing by Sam Holmes)