Sep 27, 2022 02:35AM ET
By:AnalysisWatch
Sterling rallied on Tuesday, but did so mostly on hope, profit-taking and rising British yields, leaving traders worried about the broader implications of its record fall.
As the dollar eased, the pound rose 1% in Asia to $1.0805 and is up nearly 5% from Monday's low of $1.0327. The kiwi was also up 1%, its first gain in seven sessions, the euro was up 0.5% and the Aussie was up 0.7%.
However, little has fundamentally changed since sterling's slide was triggered by concerns over Britain's tactic of relying on unfunded tax cuts to stimulate growth, apart from an implosion in gilts that has sent short-term yields up 100 basis points in two days.
The Bank of England has made a rather anodyne pledge to monitor markets and raise interest rates if necessary, and the focus will be on central bank chief economist Huw Pill's appearance at a roundtable at 1100 GMT.
The greenback has rallied as expectations that U.S. interest rates will stay higher for longer solidify and as sudden moves like the pound's make traders nervous. As the pound fell on Monday, the dollar hit new highs againstagainst the euro and many more.
The dollar index, which measures the greenback against a basket of six major currencies, hit a 20-year high of 114.58 and was at 113.51 on Tuesday.
Last week, Japan intervened to support the battered yen for the first time in decades, which has been enough to keep the yen from further losses for the time being.
The yen last traded at 144.41 to the dollar, steady even as the Bank of Japan has poured more money into unscheduled bond buying to support yields.
The euro has touched a two-decade low of $0.9528, weighed down by the energy crisis and escalating war risks in Ukraine. It was last worth more than a penny at $0.9651.