Pound Slump

The British pound stabilised in Asian trading on Tuesday after plunging to a record low a day earlier, as the Bank of England and the British government tried to soothe markets nervous about a volatile UK economy. The instability began to have real-world impacts, with several British mortgage lenders withdrawing deals amid concern that interest rates may soon rise sharply. The pound was trading at around $1.08 on Tuesday morning. On Monday it plunged to $1.0373, the lowest since the decimalisation of the currency in 1971, on concerns that tax cuts announced Friday by Treasury chief Kwasi Kwarteng would swell government debt and fuel further inflation. Late Monday the central bank said it was closely monitoring" the markets and would not hesitate to boost interest rates when it next meets in November to curb inflation that is running at 9.9%. The UK Treasury also sought to reassure markets, saying it would set out a medium-term fiscal plan on Nov 23, alongside an economic forecast b

The pound plunged nearly 5% at one point in Asia trade to break below 1985 lows and hit $1.0327. Moves were exacerbated by thinner liquidity in the Asia session

The last time the sterling-dollar exchange rate was this low the world's richest nations signed the Plaza Accord, an agreement to weaken the US currency

The currency is trading around $1.18, less than 4 US cents away from its weakest level since 1985 against the dollar, underscoring the challenges facing the British economy

Investors were also focusing on whether US President Donald Trump will impose tariffs on nearly $160 billion worth of Chinese consumer goods from December 15.

Johnson wants to change the exit terms struck by predecessor Theresa May but insists he will leave the EU without any agreement at all if necessary on October 31

Trade sources said Indian exporters have now devised three strategies to deal with the situation