SYDNEY sterling was above a record low on Tuesday, but it was perched above its record low thanks to soaring yields on British debt and the hope of a response from policymakers or politicians, with its gyrations that make markets less attractive to the benefit of the dollar.
On Friday and again on Monday the pound plunged to a record low of $1.0327 as investors question Britain's economic gambit of unfunded tax cuts to spur growth.
It bounced back to $1.0770, helped by the Bank of England's promise to monitor markets and hike if necessary, and a bloodbath in gilts that has driven an incredible 100 basis point rise for two-year yields in just two trading days.
At a policy forum at 1100 GMT, BOE chief economist Huw Pill will be closely watched and analysts are wary of the currency's recovery.
Lee Hardman, an analyst at the MUFG Bank, said the pound would remain volatile in the week ahead as market participants wait to see how policymakers in the UK respond to the loss of confidence in the pound and gilts.
The pound has dropped 5 per cent since Thursday and 21 per cent this year against an ever stronger dollar.
The dollar has climbed as expectations have solidified for U.S. interest rates to stay higher for longer, and as sudden moves like the pound's rattle traders. The dollar went to new highs on the euro and many more as the pound fell on Monday.
Paul Mackel, global head of FX research at HSBC in Hong Kong, said that everyone was hoping that the dollar was peaking and peaking, but it's just too premature.
The Fed is firmly hawkish and global growth is weakening, and you put those forces together with higher elements of risk aversion - it's all pointing to a strong dollar if not a strengthening dollar. Japan intervened to support the battered yen for the first time in decades last week, which has been enough to stave off too many losses for the yen for now.
The yen was trading last at 144.39 per dollar.
The U.S. dollar index, which measures the dollar against a basket of six majors, hit a 20 year high of 114.58 and was down a bit at 113.87 on Tuesday.
The euro was at a two-decade low of $0.9528 and is weighed down by an energy crisis and new risks of war in Ukraine. It was a cent above that at $0.9626 in Asia trade.
The Aussie and kiwi hit 2 -- 1 2 year lows on Monday and were trying to bounce back on Tuesday, with the Aussie up 0.3 per cent to $0.6479 and the kiwi up 0.8 per cent to $0.5670.
China's yuan hit a 2 -- 1 2 year low on Monday and was steady at 7.1639 on Tuesday.