NEW YORK/LONDON (Reuters) – Sterling fell against the dollar on Wednesday before paring some losses after the Bank of England said it would intervene to support the gold market, and the dollar index touched a new 20 points. The turnover during the year has been volatile.
The Bank of England said it will buy as many long-term government bonds as needed between now and October 14 to stabilize financial markets, and added that it would delay the start of next week for a gold selling program. Read more
As the markets tried to comprehend what this means for the pound, the currency slipped, jumping to $1,084 and dropping to $1.0539. The last drop was 0.4% at $1.0695.
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“They are really trying to help the gold market structure, more than anything…the fact that they are doing (quantitative easing) effectively again, while raising interest rates is confusing monetary policy expectations,” said Brad Bechtel. , global head of foreign exchange at Jefferies in New York.
It also forces the pound to be the outlet valve for the additional expenditures proposed by the government.
Investors were also eyeing the safety of the dollar on the back of political uncertainty after gas leaked from Nord Stream pipelines between Russia and Europe into the Baltic Sea. NATO Secretary General Jens Stoltenberg attributed the leaks to acts of sabotage. Read more
Bechtel said, also referring to the Federal Reserve’s aggressive rate-raising cycle aimed at taming inflation.
“It’s the Fed, which is outperforming in terms of being aggressive and continuing to rise aggressively. The world understands that the United States is in a better position to deal with higher rates while other economies are more vulnerable.”
The dollar index, which measures the greenback against a group of major currencies, had earlier hit a 20-year high of 114.78 at 114.100.
While the dollar’s gains were initially broad, the greenback was lower in morning trading in the US with the euro last rising 0.02% at $0.9595 after falling to $0.95355.
The dollar was last down 0.22% against the Japanese yen at 144.510 after touching a high of 144,860.
The Australian dollar, which is particularly sensitive to fluctuations in investor sentiment, rose 0.420%.
Elsewhere in Asia, the offshore yuan hit a record low, weighed down by expectations of a US interest rate hike. Read more
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Additional reporting by Sinad Karo in New York, Ray Wei in Singapore and Elon John in London; Editing by Richard Boleyn, Kim Coogill, Shri Navaratnam, Gareth Jones and Jonathan Otis
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