The value of the pound has plunged as fears about the coronavirus pandemic trigger a mass sell-off and shake global financial markets.
Investors offloaded assets ranging from equities and oil to government bonds and gold in the rout on Wednesday.
The Times says the falls in the latter two assets, “which are usually in demand during periods of chaos”, suggest that investors were scrambling to raise cash by selling positions.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
The sell-off sent sterling below $1.15, its worst level since 1985, while the FTSE 100 ended the day down 214.32 points, or 4.05% - falling to the lowest point since October 2011.
–––––––––––––––––––––––––––––––For a round-up of the most important stories from around the world - and a concise, refreshing and balanced take on the week’s news agenda - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––
The pound is now at a 31-year low against the US dollar, after dropping by more than 12% since the beginning of the year, and by more than 9% against the euro.
Several other currencies have also collapsed in value against the US dollar, with the Australian dollar falling to its lowest level since January 2003.
Sky News business presenter Ian King says these drops could be down to the relative attractiveness of the US dollar and the euro for investors looking for “safe haven-buying” - investments that are expected to retain or increase in value during times of market turbulence.
All the same, the Dow Jones yesterday lost “almost all the gains it had previously enjoyed under Donald Trump”, says The Times.
Wall Street also joined the rout, with trading temporarily halted after circuit breakers designed to give investors breathing space were tripped for the fourth time in recent days.
Jim Reid, a strategist at Deutsche Bank, said: “Investors are trying to calibrate to what the new world looks like. No one’s got certainty about when the economy is going to be anything vaguely like normal again.”
This lack of certainty has been underlined by UK Chancellor Rishi Sunak’s announcement earlier this week of a £350bn economic stimulus package.
Sunak is offering £330bn of government-backed loans for businesses and another £20bn in direct cash support - with the new injection of money coming less than a week after an initial £7bn package was announced in the Budget.
The chancellor is also giving all retail, hospitality and leisure businesses a one-year holiday from their business rates bill.
