LONDON: Sterling held near its lowest levels since 2020 on Tuesday against a broadly firm dollar, with worries about Britain’s economic outlook exacerbated by latest debt numbers and fears that COVID-19 restrictions in China will hurt world growth.
Sterling was down 0.6% at $1.2660 at 1430 GMT, after falling to its lowest versus the dollar since July 2020.
It is down 3.7% this month against the dollar and set for its biggest monthly fall since July 2019, with growing signs of a weakening economic outlook hurting the currency.
Data on Tuesday showed British government borrowing in the recently ended 2021/22 financial year was almost 20% higher than forecast by the country’s budget office last month.
That underscored the challenge for finance minister Rishi Sunak, who is under pressure to give new help to households and businesses hit by surging inflation, but who says he wants to fix the public finances after his COVID-19 borrowing surge.
“There is little sign of the pound moving back into favour with this morning’s borrowing data highlighting the difficulties of the Chancellor in softening the impact of the cost of living crisis given the increased weight of debt maintenance,” said Jane Foley, head of currency strategy at Rabobank.
Fears, meanwhile, that more stringent COVID-19 measures in China could slow down the global economy encouraged investors to buy the safe-haven dollar as Beijing ramped up plans for mass-testing of 20 million people.
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