Pound hits record low versus dollar, markets drop on recession fears

HONG KONG, Sept 26 (AFP): The pound hit a record low against the dollar Monday on surging fears about the UK economy after the government unveiled a huge tax-cutting budget.

The selloff came as most equity markets across Asia fell again owing to a growing expectation that central bank interest rate hikes to fight runaway inflation would lead to deep and painful recessions.

Officials in several countries including the United States, Britain, Switzerland and Sweden unveiled more increases in the cost of borrowing.

The moves sent equity markets deep into the red again after officials reiterated their focus on fighting inflation, even if that means causing a recession.

But the biggest casualty of the week was the pound, which fell below $1.10 for the first time since 1985 as new finance minister Kwasi Kwarteng announced his controversial mini-budget.

It then extended the losses Monday to an all-time low of $1.0350 in Asian trade after he said he intended to unveil further reductions, despite his budget causing ructions on London's markets.

It also fell to a two-year low against the euro, though the single currency remains under pressure against the dollar, sitting at 2002 levels.

Now, observers are warning that the pound could fall to parity with the greenback.

Kwarteng, who was put in place by Liz Truss after she became prime minister earlier this month, said he planned to slash taxes to kickstart the British economy and provide cash to cushion families from rocketing energy costs.

But investors were spooked by the huge amount of borrowing likely needed for the multibillion-pound package, which critics said would benefit the rich far more during a cost-of-living crisis.