Euro hits fresh 20-year low vs dollar
Sterling falls to new 37-year trough
Dollar index is at 20-year high
Dollar/yen higher on the day, but markets still cautious
(Adds new comment, FX table, byline, NEW YORK dateline; bullets, updates prices)
The euro and sterling plummeted to fresh 20-year and 37-year lows against a surging U.S. dollar on Friday after surveys showed the downturn in business activity across the euro zone and Britain accelerated this month and the economies were likely entering a recession.
Also weighing on sterling, Britain's new finance minister Kwasi Kwarteng announced tax cuts and household and corporate support measures and the UK debt office laid out plans for 72 billion pounds ($79.74 billion) of additional issuance for this financial year to fund the stimulus.
Sterling GBP= was set for its biggest weekly decline against the U.S. dollar in two years after it touched a fresh 37-year low of $1.1022. The pound was last down 1.9% at $1.1049.
British bond yields were set for their biggest daily rises in decades.
"The UK budget proposals do not reflect the need and the realities of the UK economy, one that likely requires corporations to pay more so that higher revenue can come in to the government," said Juan Perez, director of trading at Monex USA in Washington.
"A lot of the growth in the UK could come from further debt at a time of deep recessionary pressures and the market is reacting swiftly," he added
Earlier in the morning, UK PMI figures showed the downturn in Britain's economy worsened this month as companies battled soaring costs and faltering demand.
Moving in line with the pound, the euro EUR=EBS dropped 0.9% to $0.9755, after earlier hitting its lowest level since October 2002 of $0.9726.
The fall was triggered in part by data showing S&P Global's flash euro zone Composite Purchasing Managers' Index (PMI), seen as a good gauge of overall economic health, fell further in September.
The downturn in German business activity deepened, as higher energy costs hit Europe's largest economy and companies saw a drop in new business.
Europe's shared currency was on track for its largest weekly percentage drop since March. CENTRAL BANK POLICIES The yen JPY=EBS was 0.5% lower at 143.14 per U.S. dollar, but likely set for its first weekly gain in more than a month after Japanese authorities intervened in markets on Thursday to support the currency for the first time since 1998.
The yen rallied more than 1% on Thursday on news that Japan had bought yen to defend the battered currency. Trading was thin on Friday with Japanese markets closed for a public holiday.
The dollar index =USD , which measures the U.S. currency against a basket of currency including euro, sterling and yen, surged to 112.44, its highest since May 2002 and topping two-decade highs hit earlier this week. It was last up 1% at 112.38 and set for its best week since March 2020.
"The buck is indeed a safe haven unlike any other time in recent decades because the war and its effects are not affecting the U.S.'s domestic goals," said Monex's Perez.
The Bank of England lifted interest rates by 50 basis points on Thursday in an attempt to tackle inflation but, like previous rate hikes in recent months, the move failed to support the pound as it was overshadowed by concerns about the economy.
The dollar received a boost this week from a very hawkish Federal Reserve policy announcement and rising Treasury yields. US10YT=RR
======================================================== Currency bid prices at 10:10AM (1410 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 112.4000 111.2200 +1.08% 17.496% +112.5100 +111.0700 Euro/Dollar EUR=EBS $0.9737 $0.9834 -0.99% -14.36% +$0.9851 +$0.9726 Dollar/Yen JPY=EBS 143.0900 142.4000 +0.48% +24.29% +143.2800 +141.7700 Euro/Yen EURJPY= 139.32 140.00 -0.49% +6.91% +140.2500 +138.9100 Dollar/Swiss CHF=EBS 0.9775 0.9769 +0.07% +7.18% +0.9831 +0.9757 Sterling/Dollar GBP=D3 $1.1016 $1.1259 -2.13% -18.52% +$1.1273 +$1.0995 Dollar/Canadian CAD=D3 1.3554 1.3488 +0.50% +7.21% +1.3577 +1.3470 Aussie/Dollar AUD=D3 $0.6565 $0.6642 -1.14% -9.67% +$0.6656 +$0.6556 Euro/Swiss EURCHF= 0.9517 0.9608 -0.95% -8.22% +0.9622 +0.9499 Euro/Sterling EURGBP= 0.8836 0.8734 +1.17% +5.19% +0.8850 +0.8712 NZ NZD=D3 $0.5788 $0.5846 -0.98% -15.42% +$0.5856 +$0.5772 Dollar/DollarDollar/Norway NOK=D3 10.5550 10.3915 +1.50% +19.73% +10.5735 +10.4155 Euro/Norway EURNOK= 10.2763 10.2331 +0.42% +2.63% +10.2888 +10.2080 Dollar/Sweden SEK= 11.2283 11.0650 +0.52% +24.51% +11.2452 +11.0552 Euro/Sweden EURSEK= 10.9325 10.8763 +0.52% +6.78% +10.9552 +10.8896 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
