Pound plunges as UK's new economic plan rattles investors

Currency at record low following sweeping proposal to slash taxes and increase borrowing

TOKYO The British pound tumbled to a record low on Monday, prompting speculation of an emergency response from the Bank of England (BOE), as confidence evaporated in Britain's plan to borrow its way out of trouble, with spooked investors piling into US dollars.

The pound dived by as much as 4.9 per cent to an all-time nadir of US$1.0327 before stabilising at around US$1.05405, 2.9 per cent below the previous session's close.

It dropped 3.6 per cent last Friday when new finance minister Kwasi Kwarteng unveiled historic tax cuts funded by the biggest increase in borrowing since 1972.

Against the Singapore dollar, the pound sank 2.89 per cent to $1.5079 as at 11.55am on Monday, and is now down about 17 per cent this year.

"Sterling is getting absolutely hammered," said Mr Chris Weston, head of research at Pepperstone.

"Investors are searching out a response from the Bank of England.

They are saying this is not sustainable, when you have got deteriorating growth and a twin deficit." The pound's searing drop helped boost the safe-haven US dollar to a new two-decade peak against a basket of major peers.