The British pound slumped to a record low on Monday (26 September) morning as investors piled in to dollars, following last week’s announcement by the new PM Liz Truss led UK government that it would implement tax cuts and investment incentives to boost growth.
The pound briefly plunged 5 per cent to $1.0327 in Asia, breaking below 1985 lows as confidence in Britain's economic management and assets evaporated.
Even after bouncing back to $1.05, the currency is down 7 per cent in two sessions.
New British Chancellor Kwasi Kwarteng has promised more tax cuts on top of a 45 billion pound package he announced on Friday amid expectations borrowing will surge.
Further, the pound has also been under pressure due to strength of the dollar.
The collapse sent the dollar higher broadly and it hit multi-year peaks on the Aussie, kiwi and yuan and a new 20-year top of $0.9528 per euro.
In the Asia-Pacific region, Japan, South Korea and China’s currencies weakened against the dollar, while the Australian dollar was about flat.
The US dollar index has been rising strongly this year as the Federal Reserve continues to raise interest rates aggressively to tame inflation.
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