Sterling Reaches a New Low versus The U.S. Dollar

Following last week’s declaration by the incoming U.K. administration that it will enact tax cuts and investment incentives to encourage growth, the British pound fell to a record low in Asia on Monday morning. The U.S. dollar index has risen sharply this year as the Fed rapidly hikes interest rates. Interest rate spreads between the USA and Japan have grown considerably as the Bank of Japan maintains its ultra-low interest rates.

Sterling sank 4% to an all-time low of $1.0382 in Asia on Monday, continuing its recent lackluster trade as the U.S. dollar advances.

Critics argue that these economic policies will disproportionately benefit the wealthy and could lead to the U.K. incurring large amounts of debt when interest rates are rising.

Currencies

Japan, South Korea, and China’s currencies fell against the U.S. dollar, but the Australian dollar remained relatively stable.

The Japanese yen was trading at 144 per dollar, down from 144 after the government intervened in the currency market last week.

The South Korean won was trading near 2009 levels, at 1,428.52 per dollar.

Asian stocks began the final quarter week on the decline on Monday. Meanwhile, the dollar rose as the possibility of high-interest rates and weak growth shook markets.

After a brief dip, S&P 500 futures were flat. Tokyo, Sydney, and Hong Kong futures all indicated drops.

In weak morning activity, the dollar set new highs against the sterling, the euro, and the Australian dollar currency.

Bonds and stocks dropped last week. The United States and a half-dozen other countries boosted interest rates and forecasted misery. To support the yen, Japan intervened in currency exchange. Investors have lost faith in Britain’s economic management.

On Friday, gilts saw their biggest selling in three decades, and the pound hit a 37-year low of $1.0764 on Monday, as speculators fear that anticipated tax cuts will strain government finances to the breaking point.