Sterling dips after Truss resigns, fragile yen weakens past 150 level

Sterling fell on Friday as investors digested the news that British Prime Minister Liz Truss had resigned after just six weeks in office, while the Japanese yen was near a fresh 32-year low.

The pound fell 0.21% to $1.1215 in early Asian trade after a brief rally to a high of $1.1338 in the previous session after Truss announced her retirement.

“I think that was a knee-jerk reaction to at least a temporary easing of political uncertainty in the UK… I think markets are pretty happy with the news at the moment,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia (CBA). . .

“But the news we’ve heard has removed some but not all of the political uncertainty in the UK economy and we’ll hear more about fiscal policy later this month.”

Truss was brought down by an economic program that sent shockwaves through markets and shattered the country’s reputation for financial stability.

The Conservative Party, which holds a large majority in Parliament and does not have to hold a national election for the next two years, will now have until October 28 to elect a new leader – Britain’s fifth prime minister in six years.

The euro fell 0.15% to $0.97725 after tracking sterling’s move to an overnight high of $0.98455.

Meanwhile, the yen was last seen buying 150.20 per dollar after hitting a fresh 32-year low of 150.29 overnight. It’s down almost 1% this week and is on course for a 10th straight weekly loss.

The struggling currency weakened above the symbolic 150 mark for the first time late Thursday afternoon in Tokyo, but rose sharply from an interim low of 150.09 per dollar to 149.63 within a minute.

Fresh threats of intervention from Japanese policymakers have kept investors on high alert, although there has been no news of further action since the Treasury Department’s dollar-selling and yen-buying intervention last month.

“(They) can no longer rely solely on one-off interventions to prevent the yen from depreciating. Either yield curve control will be lifted or concerted action will be taken,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis.

Data on Friday showed that Japan’s core consumer inflation rate rose to a fresh eight-year high of 3.0% in September, testing the Bank of Japan’s resolve to keep interest rates ultra-low.

Elsewhere, the greenback rose against a basket of currencies on rising Treasury yields, with the US dollar index rising 0.03% to 112.97.

US Treasury yields continued to rise overnight, with the two-year Treasury yield hitting a 15-year high of 4.623%, while the benchmark 10-year Treasury yield hit its highest since June 2008 at 4.243%.

Fed officials showed no signs of backing down from their aggressive rhetoric. Federal Reserve Bank of Philadelphia President Patrick Harker said overnight that the central bank is not done raising its short-term interest rate target amid very high inflation rates.

The risk-sensitive Aussie fell 0.18% to $0.6272 but was on course for its first weekly gain after a losing streak for the past five weeks.

The kiwi traded 0.22% lower at $0.56625 but was similarly on course for its first weekly gain, posting nine straight weeks of losses.

“I think that reflected better risk sentiment in the markets — we’ve seen pretty strong corporate earnings,” CBA’s Kong said.

“But here too, in this current market environment, the outlook for the global economy is still deteriorating.” Sterling dips after Truss resigns, fragile yen weakens past 150 level

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