Pound rebounds as focus shifts to Bank of England decisions

The British pound rebounded on Tuesday, but its trading was built mostly on hope, profit taking and higher British yields, leaving traders worried about the broader implications of its record decline.

With lower dollar, sterling rose by 1% in Asia to $1.0805 and nearly 5% from Monday’s low of $1.0327. The euro rose 0.5%, and the Australian dollar rose 0.7%.

According to “Reuters”, the Bank of England made a somewhat soothing promise to monitor the markets and rally if necessary, and attention will be focused on the appearance of the central bank’s chief economist, How Bell, at the Monetary Policy Committee meeting.

The dollar rose with the consolidation of expectations that US interest rates would remain elevated for a longer period, and with sudden moves such as pound traders. With the pound falling on Monday, the dollar jumped to new highs against the euro and many other currencies.

The dollar, which measures the greenback against a basket of six major currencies, hit a 20-year high at 114.58 and fell from that at 113.51 on Tuesday.

Japan intervened to support the collapsing yen for the first time in decades last week, which was enough to avoid even larger losses for the yen for the time being.

The yen last traded at 144.41 per dollar, steady even as the Bank of Japan pumped more cash into buying non-scheduled bonds to keep a cap on yields.

The euro hit a two-decade low of $0.9528, affected by the energy crisis and escalating war risks in Ukraine.

The Australian dollar reached its lowest level in two and a half years on Monday and was set to rebound, with the Australian dollar rising 0.6% to $0.6500 and the New Zealand dollar 1.2% to $0.5703.

The Chinese yuan hit a two-and-a-half year low on Monday and broadly settled at 7.1589 against the dollar on Tuesday.