Sterling slumps after BoE buys bonds, dollar hits 20-year high

NEW YORK/LONDON, Sept. 28 (Reuters) – The British pound fell against the dollar on Wednesday before compensating for some losses after the Bank of England (BOE) said it would step in to support the gold market, and the dollar index hit a new 20 Trading at the highest level for the year was volatile.

The BOE said it would buy as many long-term government bonds as necessary to stabilize financial markets between now and October 14, adding that it would delay the start of its gold selling program next week. read more

As the markets struggled to digest what this meant for the pound, the currency collapsed, jumping as high as $1,084 and fell to $1.0539. It had last fallen 0.4% to $1.0695.

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“They’re really trying to help the structure of the gold market more than anything else… The fact that they’re back on track (quantitative easing), while also raising interest rates, confuses the outlook for monetary policy,” he said. Brad Bechtel. , Global Head of FX at Jefferies in New York.

“It also forces the pound to be the outlet for the additional spending proposed by the government.”

Investors also looked to the dollar’s safety against a backdrop of political uncertainty after leaks on Nord Stream pipelines between Russia and Europe spewed gas into the Baltic Sea. NATO Secretary General Jens Stoltenberg attributed the leaks to sabotage. read more

“Some of it is security-related, given what we saw yesterday with the NordStream and the situation in Russia, Ukraine,” Bechtel said, also referring to the Federal Reserve’s aggressive rate hike cycle aimed at taming inflation.

“It’s the Fed that is outperforming in terms of being aggressive and continuing to increase aggressively. The world is realizing that the US is in a better position to handle higher interest rates, while other economies are more vulnerable.”

The dollar index, which measures the greenback against a group of major currencies, was after previously hitting a new 20-year high of 114.78, most recently at 114,100.

While the dollar’s gains were initially broad-based, the dollar eased on US trading mornings with the euro gaining 0.02% at $0.9595 from a low of $0.95355.

Against the Japanese yen, the dollar last fell 0.22% at 144,510 after reaching a high of 144,860.

The Australian dollar, which is particularly sensitive to fluctuations in investor sentiment, rose 0.420%.

Elsewhere in Asia, the offshore yuan bottomed out, pressured by expectations of further rate hikes in the US. read more

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Reporting by Sinéad Carew in New York, Rae Wee in Singapore and Alun John in London; adaptation by Richard Pullin, Kim Coghill, Shri Navaratnam, Gareth Jones and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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