SINGAPORE/LONDON, Oct 3 (Reuters) - Sterling rose on
Monday after Britain reversed a plan to cut the highest rate of
income tax, while the yen weakened past 145 per dollar, near the
level where Japanese authorities intervened last month.
The pound touched $1.128 after media reports of the
u-turn, its highest level since Sept. 22, the day before British
finance minister Kwasi Kwarteng sent markets tumbling with a new
"growth plan" to cut taxes and regulation, funded by vast
Having pared gains, sterling was last up 0.2% at $1.1188.
"We get it, and we have listened," Kwarteng said regarding
the reversal of a plan to cut the 45% tax band, one contentious
part of the package of measures which drove sterling to an
all-time low of $1.0327 and sent gilts spiralling, prompting the
Bank of England to step in.
"Clearly sterling has performed better on the news, but
there are still a lot of questions, ultimately the 45 pence tax
rate was only a small part of the unfunded tax cuts announced,'
Jane Foley, head of FX strategy at Rabobank, said.
"The question remains is this enough? The answer will be
clear in a few weeks time when the Bank of England measures
end. UK assets, the pound and gilts are not out of the woods
yet, and the British government has a lot to do to get back
Elsewhere, the Japanese yen weakened to 145.40 per
dollar in Asia trade, past the 145 mark for the first time since
Sept 22 when authorities intervened to prop up the currency.
The dollar was last up 0.24% at 145.1 yen.
"Each time (dollar/yen) gets to 145, it gets people excited.
But it's the magnitude of the move that sometimes matters,"
Christopher Wong, a currency strategist at OCBC, said.
"That said, we remain watchful and won't rule out stealth
yen intervention if the magnitude of the yen's decline increases
again, perhaps when it breaches 146, using current levels as
Monday's fall came as finance minister Shunichi Suzuki said
Japan stood ready for "decisive" steps in the foreign exchange
market if excessive yen moves persisted.
The yen has been weakening due to Japan's policy of keeping
interest rates pinned down at a time when they are rising
elsewhere. After much speculation, authorities last month
intervened in markets, spending a record of 2.8 trillion yen
($19.7 billion) to prop up the currency.
The euro fell 0.2% to $0.97785, not helped by data
that showed manufacturing activity across the euro zone declined
further last month.
Reports from Reuters and others that the OPEC+ group of oil
producers is discussing potential output cuts of more than 1
million barrels per day also weighed on the currency, given
Europe's precarious energy situation.
That news, however, gave a small boost to the Norwegian
crown and the Canadian dollar, with the U.S.
dollar sliding around 0.5% on each of the commodity currencies.
The Australian and New Zealand dollars gained ground ahead
of expected rate hikes by their central banks this week with the
Aussie up 0.6% at $0.645 and the kiwi 1%
higher at $0.5655.
(Reporting by Rae Wee; editing by Clarence Fernandez, Jason
Neely and Andrew Heavens)