Wednesday, December 7

Dollar dips as UK budget U-turn improves market sentiment


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NEW YORK — The dollar dipped against a

basket of major currencies and sterling jumped on Monday after

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Britain’s new finance minister ditched most of the government’s

“mini-budget,” sparking a rally in UK and US government

bonds and reducing demand for the safe-haven US currency.

Jeremy Hunt, who was appointed finance minister by Prime

Minister Liz Truss on Friday, reversed large swathes of the

45-billion pound “mini-budget” that sparked unprecedented market

turmoil in which the pound hit record lows and the Bank of

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England was forced to intervene.

“The pound has been the driver of the FX market this month

so far, and the big change the UK government has announced has

restored faith in the pound and taken the bid on the US dollar

out,” said Adam Button, chief currency analyst at ForexLive.

British gilts rallied sharply after the news, helping to

also send US Treasury yields lower.

Hunt replaced Kwasi Kwarteng, whose package of unfunded tax

cuts on Sept. 23 unleashed a bond market sell-off.

“For now, the market seems happy to give the new chancellor

time and space to put the government’s house back in order,”

said Chris Beauchamp, chief market analyst at IG.

Sterling was last up 1.57% at $1.1349. The dollar

index against a basket of currencies fell 0.50% to

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112.46. The euro gained 0.69% against the greenback.

Risk sentiment also improved after Bank of America reported

a smaller-than-expected drop in quarterly profit and said that

its US consumer client spending remained strong, even if it

was slowing.

Traders are also on watch for any intervention from the Bank

of Japan after the yen fell to a 32-year low.

The Japanese currency earlier reached 148.84,

before last trading at 148.75.

Japan last month intervened to buy the yen for the first

time since 1998, after the Bank of Japan stuck to its policy of

maintaining ultra-low interest rates, which has battered the

currency this year.

Japanese authorities kept up their warnings to the market on

Monday of a firm response to overly rapid yen declines, after

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last week’s fall and meetings of global financial leaders that

acknowledged currency volatility.

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Currency bid prices at 10:02AM (1402 GMT)

Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 112.4600 113.0500 -0.50% 17.559% +113.2000 +112.3600

Euro/Dollar $0.9789 $0.9723 +0.69% -13.88% +$0.9798 +$0.9715

Dollar/Yen 148.7500 148.7850 -0.03% +29.20% +148.8900 +148.4000

Euro/Yen 145.59 144.65 +0.65% +11.72% +145.6600 +144.4200

Dollar/Swiss 0.9972 1.0053 -0.81% +9.32% +1.0045 +0.9956

Sterling/Dollar $1.1349 $1.1178 +1.57% -16.05% +$1.1367 +$1.1175

Dollar/Canadian 1.3737 1.3881 -1.03% +8.66% +1.3878 +1.3714

Aussie/Dollar $0.6280 $0.6203 +1.21% -13.63% +$0.6293 +$0.6208

Euro/Swiss 0.9759 0.9774 -0.15% -5.88% +0.9786 +0.9743

Euro/Sterling 0.8622 0.8692 -0.81% +2.64% +0.8686 +0.8614

NZ $0.5633 $0.5562 +1.29% -17.69% +$0.5641 +$0.5553

Dollar/Dollar

Dollar/Norway 10.5380 10.6750 -1.19% +19.73% +10.6700 +10.5080

Euro/Norway 10.3160 ​​10.3921 -0.73% +3.03% +10.4031 +10.2918

Dollar/Sweden 11.2017 11.2994 -0.01% +24.22% +11.3305 +11.1913

Euro/Sweden 10.9662 10.9676 -0.01% +7.15% +11.0142 +10.9580

(Additional reporting by Amanda Cooper in London; Editing by

Paul Simao)

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