Sterling slips back with euro on persistent UK fiscal angst despite BoE bond-buying
By Kevin Buckland
TOKYO, Sept 29 (Reuters) - Sterling retreated again on Thursday from a sharp bounce against the dollar overnight, after the Bank of England announced unlimited bond purchases to shore up Britain's financial markets battered by the government's radical plans to cut taxes.
The UK currency jumped the most since mid-June on Wednesday, pulling the euro with it, after the BoE conducted the first of its emergency bond-buyback operations, worth more than 1 billion pounds. It committed to buying as many long-dated gilts as needed until Oct. 14.
Sterling GBP=D3 was 0.51% lower at $1.0831 as of 1200 GMT, returning some of the previous session's 1.41% rally. The euro EUR=EBS weakened 0.32% to $0.97065, following Wednesday's 1.51% surge, the biggest since early March.
Sterling had plummeted to a record low of $1.0327 on Friday as investors delivered a scathing verdict on the new government's plan for record tax cuts funded by a massive increase in borrowing, at the same time as the BoE is aggressively tightening monetary policy to rein in rampant inflation.
Europe's shared currency had plunged to a new two-decade low of $0.9528.
"The BoE's bond purchases may temper the UK government's borrowing costs but have not resolved the tensions between fiscal loosening and monetary tightening," Carol Kong, a strategist at Commonwealth Bank of Australia, wrote in a client note.
"Concerns about the UK's fiscal plan and its broader economy suggest GBP will likely stay offered against the USD and other major currencies in the near term."
The U.S. dollar index =USD , which measures the greenback against sterling, the euro and four other major peers, edged 0.07% higher to 113.11, heading back in the direction of Wednesday's 20-year high of 114.78.
The dollar added 0.23% to 144.43 yen JPY=EBS . The currency pair has kept its head below the 145 line since Japanese officials intervened a week ago, following a surge to a 24-year high of 145.90 that day.
Elsewhere, the risk-sensitive Australian dollar AUD=D3 sank 0.38% to $0.64995, giving back some of Wednesday's 1.34% climb.
New Zealand's currency dropped 0.42% to $0.5706, following a 1.7% surge in the previous session.
World FX rates Link
Reporting by Kevin Buckland
Editing by Shri Navaratnam
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.