The British pound has plunged to an all-time low against the dollar with investors looking for exits after the new Tory government’s fiscal plan threatened to stretch the crisis-battered country's finances to breaking point.
The pound nosedived nearly 5 percent at one point to $1.0327, its lowest since the United Kingdom went decimal in 1971, reports said on Monday.
On Monday, the British currency plummeted to an unprecedented $1.0327, extending a 3.61 percent dive from Friday, when new Finance Minister Kwasi Kwarteng enacted historic tax cuts.
The pound’s latest dive, which saw the British currency fall to near parity with the dollar, further prompted shadow chancellor Rachel Reeves to accuse Kwarteng and the Conservative Party’s newly-picked Prime Minister Liz Truss of “recklessly” gambling with Britain’s finances.
“Instead of blaming everybody else, the chancellor and the prime minister, instead of behaving like two gamblers in a casino chasing a losing run, they should be mindful of the reaction not just on the financial markets but also of the public,” said the lawmaker from the Labor Party in an interview with Times Radio.
“The idea trickle-down economics - making those at the top richer still - will somehow filter through to everybody else has been tried before, it didn’t work then, it won’t work now,” Reeves emphasized.
The development came just days after the Bank of England (BoE) announced the British economy is suffering from recession and raised interest rates to tackle the skyrocketing inflation that has squeezed the life of Britons over the past few months.
A majority of the BoE’s nine-member Monetary Policy Committee (MPC) on Thursday voted to increase the interest rate by 0.5 percentage points to 2.25 percent, a record since 2008.
Prime Minister Liz Truss had pledged to cut taxes as her main campaign scheme in the premiership contest against Rishi Sunak.
Last week, the UK pound sterling exchange rate fell by more than 1 percent against the US dollar to $1.1351, registering at the time its lowest number since 1985. The currency also hit a 17-month low against the euro, with €1 worth 0.87 pounds.
Adding to the economic pressure across the country, the consumer prices index is now standing at 9.9 percent, the highest level since the early 1980s and almost five times the Bank’s 2-percent target rate.
In August, the Bank forecasted a recession for the world's fifth-biggest economy lasting from the end of 2022 until early 2024, due in large part to the hit to living standards from energy prices, pushed up by the sanctions imposed against energy-giant Russia over the Ukraine conflict.