The dollar broadly strengthened against major currency rivals in late trading on Friday, still reflecting higher US interest rates and a tougher stance expressed by the Federal Reserve. The dollar index, which measures the currency against the six major pairs, rose 1.65%. By late New York trading, the euro had dropped to $0.9674 from $0.9833 in the previous session.
The pound sterling fell more than 3% to $1.0847 from $1.1251 on Thursday, hitting its lowest level since 1985, which was classified as a “complete pound capitulation” by financial broker XTB. . In Brazil, the dollar closed at R$5.248, up 2.62%.
In the UK, Treasury Minister Kwasi Kwarteng unveiled his ambitious plan to cut taxes on the grounds that it will boost economic growth. The new measures include canceling the planned corporate tax increase to 25%, keeping it at 19%, and canceling the 1.25 percentage point increase in April in National Insurance contributions.
The £45bn package is the biggest tax cut since 1972, said Paul Johnson, director of the Institute for Tax Studies. The new policies will see an additional £411 billion in borrowing over five years, according to the London-based think tank Resolution Foundation.
The plan appears to be to borrow large sums at ever-higher rates and put government debt on an unsustainable upward trajectory, Johnson added.
Stock markets ended the day down. Nyse’s Dow Jones fell 1.62% to 29,590.41 points; the S&P 500 down 1.72% to 3,693.23 points; and the Nasdaq dropped 1.80% to 10,867.93 points. The Brazilian stock exchange (B3) closed down by 2.03%, highlighting the losses of Embraer (EMBR3, 7.46%) and Petrobras (PETR3, 7.06%).