Sterling tumbled to a record trough on Monday as traders scampered for the exits on

speculation the new government's economic plan will stretch Britain's finances to the limit. The
British pound's searing drop helped the safe-haven US dollar to a new two-decade peak against
a basket of major peers. Sterling slumped as much as 4.9% to an all-time nadir of $1.0327,
before stabilising around $1.05405, 2.9% below the previous session's close. It dropped 3.6%
on Friday, when new finance minister Kwasi Kwarteng unveiled historic tax cuts funded by the
biggest increase in borrowing since 1972. "Sterling is getting absolutely hammered," said Chris
Weston, head of research at Pepperstone. "Investors are searching out a response from the
Bank of England. They're saying this is not sustainable." The euro also touched a fresh 20-year
trough to the dollar on simmering recession fears, as the energy crisis extends toward winter
amid an escalation in the Ukraine war. A weekend election in Italy was also set to propel a right-
wing alliance to a clear majority in parliament. The dollar built on its recovery against the yen
following the shock of last week's currency intervention by Japanese authorities, as investors
returned their focus to the contrast between a hawkish Federal Reserve and the Bank of
Japan's insistence on sticking to massive stimulus. The dollar index — whose basket includes
sterling, the euro and the yen — reached 114.58 for the first time since May 2002 before easing
to 113.73, 0.52% higher than the end of last week. "The poor situation in the UK exacerbates
support for the USD, (which) can track higher again this week," Joseph Capurso, head of
international economics at Commonwealth Bank of Australia, wrote in a report. "If a sense of
crisis about the world economy were to emerge, the USD could jump significantly. "Europe's
shared currency slid as low as $0.9528, and last traded down 0.41% at $0.96545.The dollar
added 0.39% to 143.95 yen, continuing its climb back toward Thursday's 24-year peak of
145.90. It tumbled to 140.31 that same day after Japan conducted a yen-buying intervention for
the first time since 1998. On Monday, Japanese Finance Minister Shunichi Suzuki repeated that
authorities stood ready to respond to speculative moves in the currency. Elsewhere, the risk-
sensitive Australian dollar slipped to $0.6487, its lowest since May 2020 and was last trading
0.22% weaker at $0.6516. Fellow commodity currency the Canadian dollar reached a fresh
trough at C$1.3625 per greenback, its weakest since July 2020.China's offshore yuan slid to a
new low of 7.1630 per dollar, its weakest since May 2020.The People's Bank of China said on
Monday it will reinstate foreign exchange risk reserves for some forwards contracts, a move that
would make betting against the yuan more expensive in order to slow the pace of recent
depreciation.