Due to political unrest following the resignation of UK Prime Minister Liz Truss and deteriorating economic data, the British pound fell against the dollar on Friday.
The dollar gained strength as investors anticipated that the US Federal Reserve will continue its campaign of aggressive interest rate increases to combat decades-high inflation.
Investors worried that rising global interest rates could push the world economy into recession, which caused significant declines in European stock markets, echoing those on Wall Street and in Asia.
Sterling fell below $1.12 after briefly rising above $1.13 on Thursday following Truss’ resignation.
On Friday, the yield on the 30-year gilt bond issued by the British government reclaimed the four percent mark.
“We are seeing retracement of these initial moves as markets realise that there’s still huge uncertainty,” noted Markets.com analyst Neil Wilson.
“The economic policies (of Truss) were already dead in the water so the market doesn’t have a huge amount of genuine new information to move on despite the seismic events of the last 24 hours.”
After 44 days in power, Truss announced his resignation after causing market upheaval over a tax-cutting budget that was going to be financed by debt.
Official statistics on Friday that showed a sharp increase in UK borrowing and a decline in retail sales in September added to the pound’s woes.
After the dollar surpassed 150 yen, traders in other markets braced themselves for another potential intervention by Tokyo.
On Thursday, the dollar reached a 32-year high as investors wagered that the Fed will keep rapidly raising borrowing costs.
US 10-year Treasury rates increased to their highest level since the 2008 financial crisis as a result of mounting expectations for rate hikes, which in turn hurt equities.
The Bank of Japan, in contrast, is adamant about not raising interest rates despite the sky-high inflation rate in that nation.
Key figures around 1015 GMT
Pound/dollar: DOWN at $1.1114 from $1.1235 on Thursday
Dollar/yen: UP at 150.98 yen from 150.15 yen
Euro/dollar: DOWN at $0.9735 from $0.9786
Euro/pound: UP at 87.62 pence from 87.11 pence
London – FTSE 100: DOWN 0.9 percent at 6,883.43 points
Frankfurt – DAX: DOWN 1.5 percent at 12,573.45
Paris – CAC 40: DOWN 1.7 percent at 5,986.60
EURO STOXX 50: DOWN 1.6 percent at 3,437.84
Tokyo – Nikkei 225: DOWN 0.4 percent at 26,890.58 (close)
Hong Kong – Hang Seng Index: DOWN 0.4 percent at 16,211.12 (close)
Shanghai – Composite: UP 0.1 percent at 3,038.93 (close)
New York – Dow: DOWN 0.3 percent at 30,333.59 (close)
Brent North Sea crude: DOWN 0.3 percent at $92.14 per barrel
West Texas Intermediate: DOWN 0.2 percent at $84.31 per barrel