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Pound slips on central bank’s post-Brexit stimulus

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A man buys British pound from a money changer at in Singapore on June 24, 2016.  The pound nosedived to the 1.33 USD level on June 24 as the unit took a beating on fears that Britain will vote to leave the European Union, in what critics warned would be a hammer blow to financial markets. / AFP PHOTO / ROSLAN RAHMAN

A man buys British pound from a money changer at in Singapore on June 24, 2016.<br />The pound nosedived to the 1.33 USD level on June 24 as the unit took a beating on fears that Britain will vote to leave the European Union, in what critics warned would be a hammer blow to financial markets. / AFP PHOTO / ROSLAN RAHMAN

The pound dropped below $1.30 in Asia on Tuesday as the Bank of England’s post-Brexit interest rate cut and surprise stimulus weighed on the unit.

Sterling fell for its fifth day after the central bank last week voted to reduce rates to a record low 0.25 percent, cutting borrowing costs for the first time in more than seven years.

The central bank also announced £170-billion ($221-billion, 199-billion-euro) stimulus package, which it added could be expanded further.

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The aggressive moves come in response to fears that Britain’s vote in June to quit the European Union would hammer the economy.

The pound tumbled to 30-year lows in the aftermath of the shock referendum result.

In Tokyo on Tuesday, the unit bought $1.2998 after earlier touching $1.2978, its lowest since mid July. It was at $1.3040 in New York on Wednesday.

“We could see some short-term weakness in the pound,” Janu Chan, a senior economist in Sydney at St. George Bank, told Bloomberg News.

“It was an extensive stimulus program that the BoE announced.

“The economy has been hit in the short-term, and could face a minor recession.”

In other trading, the dollar edged lower to 102.34 yen from 102.49 yen.

The euro fetched $1.1085 against $1.1076 and 113.45 yen from 113.56 yen.

Despite edging down Tuesday, the dollar has been winning support as upbeat jobs data on Friday boosted hopes for a US interest rate hike this year.


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