Pound plunges to a new 37-year-low against the dollar
The pound has fallen to its lowest level against the dollar since 1985, in the wake of Liz Truss’ appointment as prime minister.
Sterling, which has been slipping for some time, fell to a new 37-year-low as UK investors baulked at the prospect of colossal borrowing to fund a new energy bills package.
It fell to as low as 1.1403 dollars today, beating the trough of 1.1412 seen at the start of the Covid crisis in March 2020.
Meanwhile, the dollar has continued a recent surge, which saw it hit a 24-year high against the Japanese yen earlier.
It also closed in on a 20-year-high against the euro.
Russ Mould, investment director at AJ Bell, explained: ‘The DXY index, which measures the value of the dollar against six major currencies, stands at its highest level since 2002.
‘Investors need to keep a close eye on this, because periods of marked dollar strength in the past have seen chaos in emerging markets, but also weakness in developed market stocks and commodity prices for good measure.’
Sterling’s recent drop has also been linked to the impact of bot soaring inflation and the gloomy economic outlook.
Last month the Bank of England forecast five consecutive quarters of recession.
The new Chancellor, Kwasi Kwarteng, spoke to business leaders earlier, highlighting that increased borrowing would be needed to fund the new Government’s energy plans, which are due to be announced tomorrow.
Soldier 'was racist towards private as he cleaned up her mountain of vomit'The fears of increased borrowing also pushed benchmark gilt yields beyond 3% – the highest in roughly 11 years.
Confidence in the pound was also weakened after Huw Pill, chief economist at the Bank of England, told MPs that Truss’ rumoured energy plan could reduce inflation compared with previous forecasts.
Though many economists believe that could be a good thing, it could mean reduced action over interest rates by the Bank.
The central bank previously predicted inflation could pass 13% in October.
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