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Pound slides for fifth day after BOE starts expanded QE programme
[SYDNEY] The pound fell for a fifth day and touched its weakest level in almost a month after the Bank of England started its expanded monetary easing program to contain the economic fallout from the UK's vote to leave the European Union.
The British currency weakened against all 16 of its major peers. As well as cutting interest rates for the first time since 2009, the central bank on Aug 4 exceeded economists' expectations with an announcement that it would increase its gilt-purchase program by 60 billion pounds (S$105 billion) to 435 billion pounds, starting this week.
"We could see some short-term weakness in the pound," said Janu Chan, a senior economist in Sydney at St George Bank Ltd.
"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."
The pound fell 0.4 per cent to US$1.2983 as of 11:20am in Tokyo, after earlier touching US$1.2979, the least since July 12. The currency is poised to match its longest stretch of daily declines since May and has fallen 1.9 per cent this month, the worst performance among 31 major peers.
St George's Chan forecasts that the pound will rebound to US$1.33 at year-end, predicting the UK economy will eventually recover without a further expansion of stimulus by the central bank.