Pound, yen and gold prices sharply rose together in contrast to USD

Pound

The pound rose to its highest level (1.5% against the dollar, to $1.1331) since September 22 against the dollar in the October 3 session, a day after British Finance Minister Kwasi Kwarteng released a new “growth plan” that addressed the issue of reducing income tax and government loans.

Finance Minister Kwasi Kwarteng said he would release details “shortly” on how he plans to reduce public debt as part of his medium-term economic output. In a post on the morning of October 3, Mr Kwarteng said: “We understand and we have listened.” The Chancellor of the Exchequer said the decision to cut taxes for those earning £150,000 or more “has become a distraction from our vital mission to address the challenges facing the country. Therefore, I announce that we will not proceed with the abolition of the 45 per cent tax rate,” Kwasi said.

Earlier, on September 23, Minister Kwarteng announced a “short-term budget” plan, which included the abolition of the 45% tax rate on incomes over £150,000 ($167,000); it promises to cut corporate taxes, national insurance and the basic income tax rate, in order to lift the economy out of years of stagnant growth. Under the plan, the UK government would lose around £45 billion from personal and corporate tax revenues.

However, Kwarteng said, “the major macroeconomic themes haven’t changed, so let’s take that (the tax cut plan) as the old quarter, and this is a new quarter, an opportunity for stocks to rebound and the U.S. dollar to fall slightly.”

Yen

The yen reversed gains in the past session after Japan’s finance minister, Shunichi Suzuki, said Japan was ready for “decisive” steps in the foreign exchange market if the yen’s excessive decline continues.

The yen has been steadily weakening lately due to Japan’s policy of keeping interest rates low at a time when elsewhere are raising rates. After many speculations, Japanese authorities intervened in the market last month, spending a record 2.8 trillion yen ($19.7 billion) to support the local currency. Accordingly, the Japanese yen rose above the 145 JPY mark for the first time since September 22, when authorities intervened to support the money.

Gold

Gold prices rose more than 1% in the past session, to their highest level in more than a week, as the dollar and U.S. bond yields slumped.

At the end of October 3, gold prices rose 1.7% to $1,687.99, the highest level since September 22. U.S. gold futures for December rose 1.5% to $1,696.70.

Jim Wyckoff, the senior analyst at Kitco Metals, said the gold market is seeing a safe-haven bid.

Meanwhile, the dollar, which has strengthened all the year, also weakened against other major currencies in the past session. Fawad Razaqzada, the market analyst at City Index, said: “There are a few surprises in the US data, which show that the world’s largest economy is slowing down, thus reducing the need for strong interest rate hikes.” The depreciating U.S. dollar helped the demand for bullion prices in greenbacks among overseas buyers.