Investing.com – The British pound fell to its lowest level in more than a year on Thursday, weighed down by falling confidence in the country's fiscal outlook amid high borrowing costs.
At 08:10 ET (13:10 GMT), it fell 0.7% to $1.2285, falling to its weakest level since November 2023. It jumped 0.5% to 0.8385, climbing to its highest level since September last year.
Sterling is heading for its biggest three-day fall in almost two years, as it follows British government bond yields hitting multi-year highs.
Higher bond yields would normally support the country's currency, but there are fears that the rising costs needed to support UK government debt could lead to tax increases or spending cuts, hampering opportunities for economic recovery.
The new Labor government has imposed a new rule on not borrowing to spend money on a day-to-day basis, but this is now under threat.
Finance Minister Darren Jones, speaking in the House of Commons earlier on Thursday, said there was “no need for emergency intervention” in the financial markets.
Markets “continue to operate in an orderly manner” and movements in government borrowing costs were driven by “a wide range of international and domestic factors,” he said.
However, there is a real mention of government intervention on foreign exchange traders.
“The global bond market selloff had touched crude zero in the gilt market and then the gilt expansion encouraged investors to cut back on overweight sterling positions,” analysts at ING said in a note.
“Perhaps the most relevant positioning data for GBP here, where investors have felt that sterling could withstand the dollar's strong move.”
