Key Takeaways:
- Sterling falls to a record low of $1.035 against the US dollar.
- Can the GBP fall below parity with the greenback?
- Dollar's soaring index left the Asian currencies behind.
YEREVAN (CoinChapter.com) – The British Pound dropped to a record low on Sep. 26, nearly reaching parity with the US dollar.
The slump followed the UK government dishing out tax cuts and investment incentives to boost growth while attempting to stave off recession. As a result, the pound briefly fell 4% to an all-time low of $1.035 on Monday and fluctuated to $1.07 hours later.
Pound seeks parity with dollar
Several experts agree that the governmentally imposed measures to fight the approaching recession would ultimately disproportionally benefit “the wealthy.”
Mazen Issa, the senior forex strategist at TD Securities, commented on the GBP/USD exchange rate and the possible fall below parity.
[It] doesn’t seem like the U.K. government is throwing the market a bone in terms of having a more tempered fiscal trajectory, and so I think at this point right now, the path of least resistance is going to remain lower. We’ve seen the euro dip below parity — I don’t see a reason why sterlings can’t either.
the strategist said.
Moreover, Nicholas Ferres, chief investment officer at Vantage Point Asset Management, called the Bank of England’s efforts to simultaneously fight inflation and stimulate the economy a “major challenge” and hinted at a possible emergency policy meeting this week to hike interest rates.
Asian markets follow
After the US Federal Reserve’s hawkish approach, the greenback soared against the global currency basket, sending GBP, Yen, Yuan, and others to join the euro.
According to the charts, China’s yuan also slid 0.4%, which prompted the People’s Bank of China to impose a reported “risk reserve requirement of 20% on banks’ foreign exchange forward sales to clients starting Wednesday,” In a nutshell, the decision made it more expensive for traders to acquire foreign currencies via derivatives, which could hinder yuan’s declines.
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The Japanese Yen followed suit, dropping 0.6% against the greenback. The decline prompted the Japanese Central Bank to intervene by buying Yen and selling dollars for the first time since 1998. The crutches worked temporarily, but the currency resumed the slide on Sep. 26.
The Korean won also plunged 1.6% on Monday, assuming its lowest level since 2009.