SourceAl Ain News
Currencies witnessed a fierce war today, during which the dollar outperformed and the sterling collapsed, so what is the reason?
The pound fell to an all-time low on Monday, against the US dollar, which sped past the top of 20 years.
Sterling fell by 4.9% to its lowest level ever, recording $1.0327, before settling around 1.05405, a level lower than the closing of the previous session by 2.9%.
At a time when the dollar index rose very quickly towards levels of 114 points, to exceed the top of 20 years, as it recorded its highest level since March 2022, after new statements from the President of the Federal Reserve Board in Atlanta sparked a storm in the markets regarding the Fed’s continuing to raise interest rates at the necessary pace. to restrain progress.
Why is sterling sold?
On news of the pound’s plunge to a record low on Monday, traders rushed to sell it amid speculation that the new government’s economic plan in London would squeeze public finances to the limit.
Sterling fell 3.6% on Friday, when new finance minister Kwasi Quarting unveiled historic tax cuts funded by the largest increase in borrowing since 1972.
“The pound is taking a big hit,” said Chris Weston, head of research at Pepperstone.
“Investors are looking for a response from the Bank of England. They say this cannot continue.”
The euro is sinking
The euro also touched its biggest drop in 20 years against the dollar amid fears of an economic recession, with the energy crisis continuing and winter approaching amid an escalation in the Ukraine war.
dollar beast
The dollar index reached 114.58 for the first time since May 2002 before falling back to 113.73, an increase of 0.52% from the close of trading last week.
“The bad situation in the UK is increasing support for the US dollar, which could continue to rise again this week,” Joseph Caporso, head of international economics at the Commonwealth Bank of Australia, wrote in a report.
“If a sense of crisis appears in the global economy, the dollar may jump significantly,” he added.
The euro fell to 0.9528 dollars, and fell in the last trading by 0.41% at 0.96545 dollars.
The Dollar also continued its recovery against the Yen after the shock of the Japanese authorities’ intervention in the exchange market last week, as investors refocused on the contrast between the tightening of Federal Reserve policies and the Bank of Japan’s insistence on sticking with massive stimulus measures.
The dollar rose 0.39% to 143.95 yen, extending its rally back towards a peak reached on Thursday when it reached for the first time in 24 years at 145.90 yen. It fell to 140.31 on the same day after Japan intervened by buying the yen for the first time since 1998.
Japanese Finance Minister Shunichi Suzuki reiterated on Monday that the authorities are ready to respond to speculative moves in the currency.
The offshore Chinese yuan fell again to 7.1630 per dollar, its weakest since May 2020.