Pound slumps against dollar amid UK recession fears

The pound plunged to a record low against the dollar as traders grow increasingly fearful of a deep UK recession after new finance minister, Kwasi Kwarteng, unveiled a controversial tax-cutting mini-budget.

Sterling dropped to as low as $1.0350 in early Asian trade on Monday, according to Bloomberg data, with some commentators warning it could sink to parity with the greenback.

Investors began dumping the pound on Friday after Kwarteng, who was put in place by Liz Truss after she became prime minister earlier this month, set out plans to slash taxes in a bid to kickstart the ailing British economy.

And the selling continued on Monday after he said he intended to unveil further reductions, despite his budget causing ructions on London's markets, with the FTSE 100 losing around two percent.

"You've got to buy the dollar as a risk off-trade. There is nowhere else to go," said Rabobank strategist Michael Every in Singapore.

"The BOE are going to have to step in today, surely, at which point everyone's going to end up with massively higher mortgage rates to try and stabilise sterling."

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Oil and gold steady after drop

The collapse sent the dollar higher broadly and it hit multi-year peaks on the Aussie, kiwi and yuan and a new 20-year top of $0.9528 per euro.

In stocks, MSCI's broadest index of Asia-Pacific shares outside Japan was down 1 percent to a two-year low. It is heading for a monthly loss of 11 percent, the largest since March 2020. Japan's Nikkei fell 2.2 percent.

Last week, stocks and bonds crumbled after the United States and half a dozen other countries raised rates and projected pain ahead.

Oil and gold steadied after drops against the rising dollar last week.

The dollar index climbed to a fresh 20-year high on Monday, capping oil price gains.

Gold hit a more-than two-year low on Friday and bought $1,643 an ounce on Monday. 

Brent crude futures were up 17 cents, sitting at $86.29.

READ MORE: Oil prices climb on weak dollar, supply concerns