Dollar plunges as U-turn in UK budget improves market sentiment

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NEW YORK – The dollar fell against a basket of major currencies and the pound jumped on Monday after Britain’s new finance minister scrapped most of the government’s “mini-budget”, triggering a rise in government bonds. British and American state and reducing the demand for refuge. American currency.

Jeremy Hunt, who was appointed finance minister by Prime Minister Liz Truss on Friday, canceled large swaths of the £45billion ‘mini-budget’ that sparked unprecedented market turmoil in which the pound fell. reached record levels and the Bank of England was forced to intervene.

“So far the pound has been the driving force in the foreign exchange market this month, and the big change announced by the UK government has restored confidence in the pound and removed the bid on the US dollar,” said Adam Button, Chief Currency Analyst at Forex Live.

UK gilts rallied strongly after the news, also helping to push down US Treasury yields.

Hunt replaced Kwasi Kwarteng, whose package of unfunded tax cuts on September 23 sparked a sell-off in the bond market.

“For now, the market seems happy to give the new chancellor the time and space to get the house of government in order,” said Chris Beauchamp, chief market analyst at IG.

The British pound was last up 1.57% at $1.1349. The dollar index against a basket of currencies fell 0.50% to 112.46. The euro gained 0.69% against the greenback.

Risk sentiment also improved after Bank of America reported a weaker-than-expected decline in quarterly profit and said its consumer spending in the United States remained strong, although it was slowing.

Traders are also on the lookout for any intervention from the Bank of Japan after the yen tumbled to a 32-year low.

The Japanese currency hit 148.84 earlier, before last trading at 148.75.

Last month, Japan stepped in to buy the yen for the first time since 1998, after the Bank of Japan stuck to its ultra-low interest rate policy, which hurt the currency This year.

Japanese authorities on Monday maintained their warnings to the market of a firm response to too-rapid declines in the yen, following last week’s plunge and meetings of global financial leaders who acknowledged currency volatility.

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