Sterling hits record low as dollar rebounds

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Sterling hits record low as dollar rebounds

TOKYO Reuters - Sterling dropped to a record low on Monday as traders scampered for the exits due to speculation that the new government's economic plan will stretch its finances to the limit.

The British pound fell as it helped the U.S. dollar index, which measures the dollar against six peers, including sterling and the euro, to a new two-decade peak.

Europe's shared currency touched a new 20 year trough on the dollar on simmering recession fears, as the energy crisis extends toward winter amid an escalation in the Ukraine war. A weekend election in Italy was set to propel a right-wing alliance to a clear majority in parliament.

The dollar rebounded against the dollar after the shock of the Japanese currency intervention last week, as investors focused their attention on the contrast between a hawkish Federal Reserve and the Bank of Japan's insistence on massive stimulus.

The pound fell to as low as $1.0327, an all-time nadir, and last traded 3.34% weaker at $1.0490. The 3.61% drop was extended Friday after new finance minister Kwasi Kwarteng unveiled historic tax cuts funded by huge increases in borrowing.

Chris Weston, head of research at Pepperstone said that sterling is getting hammered.

The Bank of England is looking out for a response. They say this is not sustainable when you have deteriorated growth and a twin deficit. The euro slid as low as $0.9528, and last traded down 0.55% at $0.9641.

The dollar was 0.29% to 143.78 yen, continuing its climb back toward Thursday's 24 year peak of 145.90. It fell to 140.31 the same day after Japanese authorities conducted yen-buying intervention for the first time since 1998.

A former top Japanese currency official said Monday that policymakers won't try to defend a certain level, such as the 145 mark, but only conduct further operations to smooth volatility.

The dollar index was 0.76% higher at 114, and was earlier at 114.58 for the first time since May 2002.

The Australian dollar dropped as low as $0.6487, for the first time since May 2020, before trading 0.1% weaker at $0.6524.

The Canadian dollar was at a new trough at C $1.3625 per greenback, its lowest since July 2020.

China's offshore currency fell to a new low of 7.1630 per dollar, its lowest level since May 2020.