The Sterling increased, and the dollar fell versus a basket of major currencies on Monday. This was after Britain’s new finance minister scrapped most of the government’s “mini-budget,” while Bank of America’s (NYSE: BAC) profits were above expectations and increased risk-taking.
Investors wonder if the Bank of Japan would act as the yen value drops to its lowest level versus the dollar in 32 years. After Prime Minister Liz Truss was appointed Chancellor of the Exchequer on Friday, Jeremy Hunt made significant changes to the £45bn “mini-budget,” which has caused market turmoil, a weaker pound, and the need for intervention of the Bank of England.
What More Does Pound Has To Offer?
According to Adam Button, chief currency analyst at ForexLive, the pound has been the engine of the F.X. market this month, and the huge adjustment the U.K. government has made has restored trust in the pound and taken the bid on the U.S. dollar out. Following the announcement, British gilts surged significantly. Hunt took over for Kwasi Kwarteng, whose unfunded tax cut program on September 23 sparked a sell-off in bonds. According to Chris Beauchamp, chief market analyst at I.G., the market seems content to give the incoming chancellor time and space to put the government’s house back in order.
Sterling last increased by 1.54% to $1.1348 from $1.1440, its highest level since October 5. Marc Chandler, a chief market strategist at Bannockburn Global Forex, believes that the record low of $1.0327 set on September 26 is an exaggeration and that the pound likely bottomed there. He said that $1.15 would be the next significant resistance level for the pound.
The euro increased by 1.19% to $0.9838 versus the dollar, its highest level since October 6. Traders also keep an eye out for potential Bank of Japan interventions after the yen hit a 32-year low of 148.97. After the Bank of Japan continued its strategy of keeping ultra-low interest rates, which has hurt the yen this year, Japan intervened last month to buy the currency for the first time since 1998.