The British pound continued its decline against the dollar, recording on Monday the lowest level in its history, amid expectations of worsening financial conditions following the announcement of the new government's economic plan.

The sharp decline in the pound helped the dollar index, which measures the performance of the US currency against six major currencies, including the pound and the euro, reach its highest level in 20 years, according to Reuters.

The pound dropped by 4.9 percent to its all-time low at 1.0327 dollars, before settling around 1.05405, a level 2.9 percent lower than the previous session's close.

It had fallen 3.6 percent on Friday, when the new finance minister, Kwasi Kwarteng, unveiled historic tax cuts funded by the biggest increase in borrowing since 1972.

Chris Weston, head of research at Pepperstone, said, "The British pound is taking a big hit."

He added, "Investors are looking for a response from the Bank of England. They say this cannot continue."

The euro touched its biggest drop in 20 years against the dollar amid fears of an economic recession as the energy crisis continues and winter approaches amid an escalation in the Ukraine war. The elections held yesterday in Italy are also expected to produce a clear majority for a right-wing coalition in parliament.

The dollar continued its rebound against the yen after the shock of last week's intervention by Japanese authorities in the exchange market, as investors refocused on the contrast between the Federal Reserve's tightening policies and the Bank of Japan's insistence on maintaining massive stimulus measures.

The dollar index reached 114.58 for the first time since May 2002 before retreating to 113.73, an increase of 0.52 percent from the close of last week’s trading.

Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, wrote in a report: "The poor situation in the UK is increasing support for the US dollar, which can continue to rise again this week."

He added: "If a sense of crisis appears in the global economy, the dollar could jump significantly."

The euro fell to 0.9528 US dollars and dropped 0.41 percent in the last trades to 0.96545 US dollars.

The dollar rose 0.39 percent to 143.95 yen, continuing its ascent toward the peak it reached on Thursday when it hit 145.90 yen for the first time in 24 years. It fell to 140.31 on the same day after Japan intervened buying yen for the first time since 1998.

Japanese Finance Minister Shunichi Suzuki reiterated on Monday that authorities are ready to respond to speculative moves in the currency.

The offshore Chinese yuan again fell to 7.1630 per dollar, its weakest level since May 2020.

The Turkish lira falls to its all-time lowest level

The Turkish lira dropped on Monday to its lowest level ever against the dollar, driven by the Central Bank of Turkey's decision to cut interest rates last Thursday.

By 07:10 GMT, the Turkish currency fell to a new record low, recording 18.455 lira against one dollar, its lowest level ever, according to data from the Turkish site "Doviz".

The Turkish lira has lost more than 28 percent of its value since the beginning of 2022, and the interest rate cut decision deepened its losses, according to Reuters.

Last Thursday, the Central Bank of Turkey decided to cut the one-week repo rate by 100 basis points to 12 percent instead of 13 percent, in an attempt to curb inflation, which rose to more than 80 percent in August.

The Central Bank of Turkey confirmed in a statement that it will continue to firmly use all available tools until strong indicators of a permanent decline in inflation appear and the 5 percent target is achieved in the medium term, in line with the main goal of price stability.

It is worth noting that the Turkish "central bank" cut the interest rate last month from 14 to 13 percent after seven months of stability.

Gold prices plunge to their lowest levels in two and a half years

Gold prices recorded on Monday a decline to their lowest level in two and a half years due to strict measures taken regarding interest rates.

The spot gold price fell 0.1 percent to 1641.59 dollars per ounce by 12:06 GMT, after declining 1 percent earlier in the session to its lowest level since April 2020 at 1626.41 dollars.

US gold futures fell 0.6 percent to 1648.80 dollars.

Independent analyst Ross Norman said, "The strength of the dollar and rising US Treasury yields usually push gold down... However, gold's performance is not too bad within the general framework."

The dollar index, which measures the US currency's performance against six major currencies, rose to its highest level since 2002 supported by the decline in the British pound.
Gold prices have fallen by more than 400 dollars, or 20 percent, since surpassing the key level of 2000 dollars per ounce in March, as major central banks sharply raised interest rates to curb rising inflation.

The Federal Reserve (US central bank) raised interest rates last week by 75 basis points, indicating the possibility of further hikes.
US Treasury yields settled near their highest level since 2011, increasing the opportunity cost of holding gold.
Regarding other precious metals, the spot price of silver fell 0.5 percent to 18.74 dollars per ounce after earlier dropping to its lowest level in more than two weeks.
Platinum prices rose 0.1 percent to 854.93 dollars per ounce, and palladium prices increased 0.3 percent to 2073.67 dollars.