SINGAPORE, Sept 28 — The British pound sank to an all-time low of US$1.0327 yesterday , prompting jokes amongst some Singaporeans on social media that this might be a good time to import high-end goods from the United Kingdom.
Kwarteng then pledged over the weekend to cut taxes further in the new year, which only served to heighten fears of inflation rising again given that Britons will have more money to spend. But because the British government lacks the funds to do so, Selena Ling, head of treasury and research at OCBC bank, said the plan would require substantial funding through increases gilt issuance, a form of borrowing.
However, for Singapore businesses which export to the UK, Ling said the foreign exchange market volatility may be costly, and any ensuing UK recession may also mean dampened demand conditions in the near-term.On the prospect of cheaper British goods for Singaporeans, Song believes this will not last once sellers have cleared their existing stock.
He pointed out that the UK is not the only country that has witnessed a drop in its currency’s value. So too have countries such as Japan, Australia and even the European Union.Ling said the pace of the pound’s slump may have come as a surprise, but “it is always like financial markets to over-react”.
The Bank of England, like central banks around the world, has hiked interest rates a number of times this year in a bid to cool decades-high inflation.