TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Pound falls more than 1% against dollar after Bank of England move
Sterling slid as low as $1.0763 in early morning London deals, one day after the BoE snapped up long-dated government bonds in order to prevent a "material risk" to stability.
Change Size
Pound Sterling notes and change are seen inside a cash register in a coffee shop in Manchester, Britain, on Sept. 21, 2018. (Reuters/Phil Noble)
T
he British pound sank Thursday by more than one percent against the dollar after the Bank of England intervened on the bond markets to head off a fresh financial catastrophe.
Sterling slid as low as $1.0763 in early morning London deals, one day after the BoE snapped up long-dated government bonds in order to prevent a "material risk" to stability.
Also on Thursday, Asian share markets rose after Britain's central bank launched an emergency bond buying programme to stabilise a furious sell-off in gilts, though trade was skittish and sterling remained under pressure.
The Bank of England said it will buy as much as 5 billion pound ($5.4 billion) a day of long-dated government bonds until Oct. 14. It spent about a billion pounds on Wednesday and 30-year gilt yields fell 105 basis points (bps), the biggest drop ever according to Refinitiv records stretching back to 1992.
The move buoyed sterling and offered some salve to a fractious mood in markets, but by mid afternoon in Tokyo the pound was struggling for support and down 1 percent at $1.0776.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5 percent - more muted than a 2 percent surge on Wall Street overnight. Japan's Nikkei rose 0.9 percent.
S&P 500 futures fell 0.2 percent. European futures rose 0.6 percent and FTSE futures lifted 0.3 percent.
"It's all a bit of a mess," said ANZ economist Finn Robinson, quoted by Reuters.
"How long the calm and fresh optimism lasts remains to be seen. For one, this re-stimulation will lift, not quell UK inflation, and that's bad for bonds and sterling."
The fallout from unfunded tax cuts announced in Britain last week has reverberated across financial markets after setting off a collapse in British asset prices. The BoE's intervention followed steps in Korea, India and Indonesia to stabilise their financial markets this week as the U.S. dollar rallied broadly.
China's central bank said stabilising the foreign exchange market is the top priority, as the yuan hangs around its lowest levels since the financial crisis.
Later on Thursday, investors' focus will be on three Bank of England speakers, media appearances from British Prime Minister Liz Truss, German inflation data and Federal Reserve speakers.
"Note that nothing has fundamentally changed other than a circuit breaker provided by BOE," said DBS' rates strategist Eugene Leow in Singapore.
