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Plunging pound pauses as investors await policy response

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SYDNEY — Sterling steadied on

Tuesday, but was perched above its record low only thanks to

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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

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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.

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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

strengthening dollar.”

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.

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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

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Previous Change



$0.9637 $0.9609 +0.31% +0.00% +0.9638 +0.9584


144.3500 144.7000 +0.00% +0.00% +144.7050 +0.0000

Euro/Yen 139.12 139.07 +0.04% +0.00% +139.1300 +138.7100


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

All spots

Tokyo spots

Europe spots


Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Sam Holmes)



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