Sterling rebounded more than 2% against the dollar on Thursday (29th) even as British Prime Minister Liz Truss insisted on defending his plan to cut large-scale tax cuts, while the dollar index fell for two consecutive sessions, showing investors’ confidence in the Bank of England. The actions of bond purchases to stabilize the market are reassuring.
In late New York trade, the ICE Dollar Index (DXY), which tracks the greenback against six major currencies, was down 0.59% at 111.95.
The dollar fell against some currencies on Thursday after the Bank of England bought 1.415 billion pounds of government bonds with maturities of more than 20 years, a day after launching its emergency bond-buying program.
Brian Daingerfield, head of G10 FX strategy at NatWest Markets, said: “The pound has outperformed, continuing the moves we saw yesterday. The Bank of England (BoE) took pretty decisive steps to stabilize the market and the currency market responded positively.”
Since the announcement of the tax cut plan caused market turmoil, British Prime Minister Truss publicly defended the large-scale tax reduction policy for the first time on Thursday. The pound fell against the dollar in early trading, and then rose 2.2% to $1.1120 before the deadline. It closed higher in the second trading day, but it has not fully recovered the tragic decline of last Friday (23rd).
The euro was up 0.84% at $0.9812.
Economic data showed that the euro zone announced a sharp decline in economic confidence in September. Business and consumer confidence deteriorated significantly under the overall rise in inflation expectations.
In addition, Germany announced on the same day that the annual growth rate of inflation in September jumped to 10.9%, which means that the inflation data of the euro zone released on Friday (30th) may also rise further, leading to another interest rate hike by the European Central Bank (ECB) at its next meeting3 code to provide reasons.
However, some analysts believe that even if the European Central Bank raises interest rates again, it may only provide a short-term boost to the euro.
Stephen Gallo, European head of foreign exchange strategy at BMO, said: “A rate hike can support a currency, but the inflation process is never good for the currency, especially if the central bank is not properly controlling it. I don’t want to hold on just because the ECB is raising rates. There is the euro, but it is held when the dollar is peaking and when inflation in the euro zone has slowed significantly and recession prospects become clearer.”
The yen edged down 0.23% to 144.43 yen against the dollar, reversing from yesterday’s gains.
Japan intervened in the currency market last week to support the severely depreciated yen. Japanese Finance Minister Toshi Suzuki said on Thursday that the recent intervention measures were aimed at correcting market distortions caused by speculative currency fluctuations, and the authorities were ready to intervene again if speculation continued.
Reuters had previously reported that the People’s Bank of China had notified major domestic banks to prepare for intervention in the yuan’s exchange rate, and the People’s Bank of China and the State Administration of Foreign Exchange had earlier issued statements to increase support for the yuan.
The RMB exchange rate rebounded significantly. The offshore yuan rose 0.82% to 7.0960 against the dollar, while the onshore yuan also rose 1.12% to 7.1201.
The Australian dollar, which is more sensitive to risk sentiment, retreated from the previous day, depreciating 0.45% to US$0.6489. Price pressures are expected to start to ease after official monthly indicators showed Australia’s inflation growth slowed slightly to an annual rate of 6.8% from 7% in July.
As of Friday (30th) Taiwan time about 6:00 Price:
The dollar index was at 111.9675. -0.6600% The euro against the US dollar (EUR/USD) was quoted at $0.9816 per euro. +0.8528% GBP/USD (GBP/USD) was quoted at $1.1120. +2.1777% The Australian dollar against the US dollar (AUD/USD) was quoted at 1 AUD=0.6498. -0.3374% The US dollar against the Canadian dollar (USD/CAD) was quoted at 1.3678 Canadian dollars per US dollar. +0.5366% The U.S. dollar was quoted at 144.44 yen against the Japanese yen (USD/JPY). +0.2429%