LONDON (Reuters) - The pound rallied to the day’s highs on Thursday after the Bank of England cut interest rates to 0.1% and ramped up its bond-buying program.
Sterling jumped 0.8% to $1.1724 while the British currency rallied against the euro, last up more than 1% at 92.54 pence per euro..
The rate cut offered some support to the weakening pound, which collapsed to its weakest level since 1985 as traders braced for the impact of the coronavirus outbreak on the British economy.
The British currency has fallen around 12% against the dollar over eight brutal days of trading, hitting a low of $1.1450 in New York trading hours on Wednesday.
“I suspect the only uncertainty was the timing of the move but it was clearly going to happen,” said Adam Cole, chief currency strategist at RBC Capital Markets.
“The move does help but whether this or other central bank action will help draw a line under risky assets? I’m not convinced.”
Sterling has been one of several currencies to tank as investors rush to put their money in U.S. dollars, the world’s most liquid currency and seen as a safe haven in times of crisis.
Yields on British government bonds, known as gilts, fell sharply after the BoE’s move. Two-year gilt yields were last down 15 basis points on the day at around 0.19%, while 10-year gilt yields were almost 4 bps lower at 0.76% — reversing earlier rises.
The BoE’s Monetary Policy Committee voted unanimously for the rate cut and for a 200 billion-pound increase in the central bank’s bond buying programme to 645 billion pounds ($752 billion).
Reporting by Saikat Chatterjee and Dhara Ranasinghe; Editing by Kirsten Donovan