Tokyo, Sept. 29 (BNA): Sterling fell on Thursday and the US dollar recovered from its recent decline as the Bank of England’s relief on intervening in bond markets faded in the face of nagging doubts about the management of the British economy and the global outlook. growth.
The British currency jumped by the most since mid-June on Wednesday after the Bank of England announced an emergency bond-buying plan to support the gold market that was suffering from a free fall with the pound.
But sterling fell 0.8 percent to $1.0798 by mid-session in Asia and the euro fell 0.6 percent to $0.9679 as the U.S. dollar regained stability, according to Reuters.
“BoE bond purchases may ease the British government’s borrowing costs, but they have not resolved the tensions between fiscal easing and monetary tightening,” Carol Kong, a strategist at the Commonwealth Bank of Australia, wrote in a note.
“Concerns about the UK’s fiscal plan and its broader economy suggest that sterling will likely remain bid against the dollar and other major currencies in the near term.”
Sterling fell to a record low of $1.0327 on Monday as investors issued a scathing judgment on Britain’s plans to cut taxes funded by a massive increase in borrowing at the same time as the Bank of England struggles to rein in inflation.
The appearances of Bank of England officials David Ramsden, Silvana Tenrio and How Bell later on Thursday will be closely watched, as will Finance Minister Kwasi Quarting’s speech to his Conservative Party on Monday.
“The pound is not out of danger,” said DBS currency strategist Philip Wei. “The BoE is clearly treating the symptoms, not the cause.”
“The government … has not addressed the credibility of tax cut plans that critics see as exacerbating the problems of inflation,” he added.
The background to the pound’s problems is a wild dollar, and the shortness of its slide on Wednesday indicates that traders aren’t really ready to continue selling much of the dollar just yet.
The US Dollar Index, which measures the greenback against the British pound, the euro and four other major peers, had its worst session in more than two years overnight, but rebounded 0.3% to 113.31 which is not far below its 20-year high of 114.78.
Official resistance is getting stronger, particularly in Asia where Japan, South Korea, India and Indonesia are intervening in financial markets, to varying degrees, to prop up their currencies and asset prices.
The Japanese currency pair maintained its stronger side at 145 against the dollar since the government sold dollars to support the yen for the first time in decades last week. It fell slightly at 144.31 to the dollar on Thursday.
Dollar selling slowed the decline of the Indian rupee, although it broke to the weaker side at 80 against the dollar this week and hit a record low of 82 on Wednesday. The rupee remained and won under pressure.
“These stabilization efforts from policy makers around the world can help restore market confidence and provide a temporary respite for risky assets,” said Christopher Wong, currency analyst at OCBC Bank in Singapore.
“But in the end, the strong trend in the US dollar still needs to dissipate for the currency markets to take a more significant breather.”
Elsewhere, the risk-sensitive Australian dollar fell 0.7% to $0.6478. A new gauge of consumer prices showed that annual inflation eased slightly from August to July, giving hope that cost pressures may be close to peaking.
FKN