The British pound fell to a record low against the dollar

The slide came as trading opened in Asia and Australia on Monday, extending a 2.6% dive from Friday – and predicted the pound could fall against the US dollar in the coming months.

The Unprecedented currency collapse It follows Chancellor of the Exchequer Kwasi Kwarteng’s announcement on Friday that the United Kingdom will impose the biggest tax cuts in 50 years while boosting spending.

The new tax-cutting fiscal measures, which include scrapping plans to raise corporate tax and capping bankers’ bonuses, have been criticized as “trickle-down economics” by opposition Labor and even harshly criticized by the chancellor’s own Conservative members. Party.

Former Tory chancellor Lord Ken Clarke criticized the tax cuts on Sunday, saying they would lead to a fall in the pound.

“I fear that in Latin American countries such an effort will not succeed,” Clarke told BBC radio.

The pound has been hit by a string of weak economic data, but the steep rise in the US dollar has made it a safe-haven investment that sees returns in uncertain times.

The euro also hit a 20-year low of 0.964 per dollar.

But the UK’s economic outlook means the pound suffers more than most as it faces a devastating energy crisis and high inflation among the G7 nations.

The British pound’s previous record high against the US dollar was at least 37 years ago on February 25, 1985 when 1 pound was $1.054.

“If the war in Ukraine escalates … we will see a sharper pullback in both the pound and the euro,” said Clifford Bennett, chief economist at Australian brokerage ACY Securities.

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“One should not underestimate the crisis across Europe at the moment and the pound is more vulnerable than most,” he said.

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Asian markets and currencies crack

A rising US dollar sent major Asian currencies lower on Monday.

China’s yuan fell 0.5% in offshore markets to a more than 28-month low. The offshore yuan fell 0.4%.

A rapid decline spurred the People’s Bank of China Banks will impose a risk reserve requirement of 20% on foreign exchange sales to customers from Wednesday. The move will make it more expensive for traders to buy foreign currencies through derivatives, which could slow the yuan’s decline.

Elsewhere, the Japanese yen fell 0.6% to 144 against the dollar. Last Thursday, the Bank of Japan Intervening in the currency market To prop up the yen for the first time since 1998. The yen rose slightly following the intervention, but soon resumed the slide.

The Korean won 1.6% against the greenback on Monday.

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Stocks in the region were mixed on Monday after US stocks Sold on Friday Recession fears grow.
of South Korea Cosby (Cosby) Japan fell 2.7% Nikki 225 (N225) Down 2.4%, Australia’s S&P/ASX 200 shed 1.4%. of China Shanghai Composite Index (SHCOMP) decreased by 0.1%.

“Risk sentiments have been hit hard by the Fed’s recent policy action and guidance,” DBS analysts said in a research note on Monday.

Federal Reserve on Wednesday It approved a third consecutive 75-basis-point hike A drastic measure to tackle the inflation that has plagued the US economy.

Even without central bank action, Europe faces a slowdown due to the war in Ukraine, and China sees “significantly weaker growth” due to a variety of domestic factors, DBS analysts said.

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“Added to that by a sharp decline in US dollar liquidity and a sharp rise in US interest rates, the global economic outlook looks particularly bleak,” they added.

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