The British pound fell to an all-time low rate on Monday morning in Asia, following the announcement last week by the new UK government that it would implement tax cuts and investment incentives to stimulate growth.
The pound briefly fell 4% on Monday to an all-time low of $ 1.0382 in Asia. Critics say these economic measures will disproportionately benefit the wealthy and that the UK could borrow heavily at a time of rising interest rates.
“[It] doesn’t appear that the UK government is throwing a bone in the market in terms of a much more moderate fiscal trajectory, so I think at this point the path of least resistance will remain lower,” Mazen, strategist, told Issa. forex senior of TD Securities told CNBC before the pound hit a new low.
“Below $ 1.05, you are really looking at parity,” he told CNBC’s “Squawk Box Asia”.
“We have seen the euro fall below par – I don’t see why the pound can do that either,” she added. Fighting inflation as the government tries to stimulate the economy is a “big challenge” for the Bank of England, said Nicholas Ferres, a chief investment officer of Vantage Point Asset Management.
“The Bank of England could also hold an emergency meeting this week and raise interest rates, I wouldn’t be surprised if that happens,” he said. drastically weakening the pound, said Saktiandi Supaat, Maybank’s FX strategist.
“I think [the] plunge in the pound has actually led to further risk aversion, generally a kind of risk-free sentiment, which escalates further to the downside,” she said.
In the Asia-Pacific region, the currencies of Japan, South Korea, and China weakened against the greenback, while the Australian dollar remained virtually flat.
The Japanese yen traded at 144 levels against the dollar, weaker than after authorities intervened in the foreign exchange market last week. South Korea’s profits were close to the 2009 level of 1,428.52 per dollar.
The US dollar index has risen sharply this year as the Federal aggressively raises interest rates. Notably, interest rate differentials between the US and Japan have widened significantly as the Bank of Japan sticks to its ultra-low rates.
