Pound rebounds on U-turn in UK fiscal policy; The troubled yen By Reuters

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© Reuters. FILE PHOTO: British pounds and US dollars banknotes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

By Rae Wee

SINGAPORE (Reuters) – The pound rose slightly on Monday after British Prime Minister Liz Truss partially reversed its government’s economic plan, while the yen was pinned near a 32-year low as markets waited. signs of intervention by the Japanese authorities.

The pound gained 0.6% to $1.1245 in early Asian trading, after Truss said on Friday that UK corporation tax would rise to 25% from April next year instead to maintain it at 19% within the framework of his government’s initial “mini-budget”.

The news came hours after she sacked former finance minister Kwasi Kwarteng, replaced by Jeremy Hunt.

Hunt, a former foreign and health secretary, has vowed to regain Britain’s economic credibility by fully accounting for the government’s tax and spending plans, while insisting that his boss Liz Truss remains on the sidelines. country orders.

British lawmakers will try to oust Truss this week despite Downing Street’s warning that it could trigger a general election, the Daily Mail reported.

All eyes are now on how the UK government bond market will trade, after the Bank of England concluded its emergency support for the gilt market on Friday.

“If we see an increase in gilt yields, it would show that markets remain very skeptical about the sustainability of UK debt,” said Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:) (CBA).

“I think the pound should remain very volatile this week.”

Meanwhile, the yen last strengthened 0.2% to 148.48 to the dollar, but remained not far from its 32-year low of 148.86 hit on Friday, due to rising US Treasury yields and rising dollar.

The , which measures the greenback against a basket of currencies including the yen, firmed to 113.02.

Bank of Japan Deputy Governor Masazumi Wakatabe said on Saturday that the yen’s recent swings were “clearly too rapid and too one-sided”, while top monetary diplomat Masato Kanda also signaled that the country would react strongly to any excessive currency fluctuation.

“Given the strong language we’ve heard from various government officials, I think the risk is very high that we’ll see another BOJ intervention very soon,” the ABC’s Kong said.

Last month, Japan stepped in to buy the yen for the first time since 1998, after the Bank of Japan got bogged down with ultra-low interest rates, causing the yen to fall to 145.90. for a dollar.

Elsewhere, the euro gained 0.26% to $0.9748, while the Australian and New Zealand dollars rebounded slightly from recent losses.

The rose 0.35% to $0.6225, while the edged up 0.23% to $0.5575, after both falling to fresh 2.5-year lows last week.

The Chinese last bought 7.2150 per dollar.

Launching the Communist Party Congress on Sunday, Chinese President Xi Jinping called for accelerating the building of a world-class military while touting the fight against COVID-19, while reiterating the validity of China’s zero COVID policy.

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