Pound falls with euro on continued UK fiscal angst despite BoE bond buying

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TOKYO — The pound fell again on Thursday after a strong rebound against the dollar overnight after the Bank of England announced unlimited bond purchases to shore up UK financial markets battered by the government’s sweeping plans aimed at reducing taxes.

Britain’s currency jumped the most since mid-June on Wednesday, dragging the euro with it, after the BoE carried out the first of its emergency bond buybacks, worth more than a dollar. billion pounds. He has committed to buying as much long-term gilt as needed until October 14.

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The pound was down 0.51% at $1.0831 by 1200 GMT, returning part of the previous session’s 1.41% rally. The euro weakened 0.32% to $0.97065, following Wednesday’s 1.51% rise, the biggest since early March.

The pound fell 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, along with the BoE aggressively tightens its monetary policy to curb the break-in. inflation.

Europe’s common currency had plunged to a new two-decade low of $0.9528.

“BoE bond purchases may temper UK government borrowing costs but have not resolved tensions between fiscal easing and monetary tightening,” wrote Carol Kong, strategist at Commonwealth Bank of Australia. , in a customer note.

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« Concerns over the UK’s fiscal plan and its wider economy suggest that the pound is likely to remain offered against the USD and other major currencies in the near term. »

The US dollar index, which measures the greenback against the pound, the euro and four other major peers, edged up 0.07% to 113.11, heading back to a 20-year high. years from Wednesday at 114.78.

The dollar gained 0.23% to 144.43 yen. The currency pair has kept its head below the 145 line since Japanese authorities intervened a week ago, after hitting a 24-year high at 145.90 on the day.

Elsewhere, the risk-sensitive Australian dollar fell 0.38% to $0.64995, giving back some of Wednesday’s 1.34% rise.

The New Zealand currency fell 0.42% to $0.5706, after rising 1.7% in the previous session.

(Reporting by Kevin Buckland editing by Shri Navaratnam)