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Pound hits highest level since before mini-budget Pound hits highest level since before mini-budget
(32 minutes later)
The pound has hit its highest level since mid-September, as investors welcomed the appointment of Rishi Sunak as prime minister and the dollar fell.The pound has hit its highest level since mid-September, as investors welcomed the appointment of Rishi Sunak as prime minister and the dollar fell.
Sterling surged by 1.9% to $1.149 on Tuesday - the highest it has been since before Liz Truss's mini-budget.Sterling surged by 1.9% to $1.149 on Tuesday - the highest it has been since before Liz Truss's mini-budget.
Government borrowing costs also fell back to where they were last month, in a boost for Mr Sunak who took over on Tuesday.Government borrowing costs also fell back to where they were last month, in a boost for Mr Sunak who took over on Tuesday.
Financial markets have been rattled by fears over the economy in recent weeks.Financial markets have been rattled by fears over the economy in recent weeks.
In a speech today, Mr Sunak warned the country faced a "profound economic crisis" with "difficult decisions" ahead. In a speech today Mr Sunak warned the country faced a "profound economic crisis" with "difficult decisions" ahead.
Experts said the pound's strength was partly a "relief rally" after Mr Sunak was appointed, but also due to the dollar's weakness.Experts said the pound's strength was partly a "relief rally" after Mr Sunak was appointed, but also due to the dollar's weakness.
The American currency dropped on Tuesday after data showed slowing US house price growth and a decline in consumer confidence.The American currency dropped on Tuesday after data showed slowing US house price growth and a decline in consumer confidence.
Five ways a falling pound could affect youFive ways a falling pound could affect you
"The dollar is losing ground across the board today," Jeremy Stretch, head of FX Strategy at CIBC, told the BBC. "The dollar is losing ground across the board today," Jeremy Stretch, head of FX Strategy at investment bank CIBC, told the BBC.
"But there's no doubt there's a relief rally here in terms of apparent stability in the macro-economic picture after Sunak came in.""But there's no doubt there's a relief rally here in terms of apparent stability in the macro-economic picture after Sunak came in."
Last month, sterling plunged to a record low against the dollar and government borrowing costs rose sharply in the aftermath of former Prime Minister Liz Truss's mini-budget.Last month, sterling plunged to a record low against the dollar and government borrowing costs rose sharply in the aftermath of former Prime Minister Liz Truss's mini-budget.
Investors were spooked after then-Chancellor Kwasi Kwarteng promised major tax cuts without saying how they would be paid for - something Mr Sunak warned about during this summer's Tory leadership contest.Investors were spooked after then-Chancellor Kwasi Kwarteng promised major tax cuts without saying how they would be paid for - something Mr Sunak warned about during this summer's Tory leadership contest.
Mr Sunak, a former hedge fund manager, is seen as a safer pair of hands by investors. Mr Sunak, a former hedge fund manager, is seen as a safer pair of hands by investors and has pledged to fix "mistakes" made under Liz Truss's leadership.
On Tuesday, it emerged that new Chancellor Jeremy Hunt - who reversed almost all of Ms Truss's tax cuts in a bid to stabilise the financial markets - had kept his job. New Chancellor Jeremy Hunt - who reversed almost all of Ms Truss's tax cuts last week - will keep his job and is scheduled to set out his economic plan for tax and spending on 31 October.
Mr Hunt is scheduled to set out his economic plan on tax and spending on 31 October. Borrowing costs fall
On Tuesday government borrowing costs fell back to levels seen just before the mini-budget, with the interest rate - or yield - on bonds due to be repaid in 30 years' time dropping to 3.6%.
Meanwhile, the yield on bonds due to be repaid in five years' time, which influences the cost of new five-year fixed rate mortgages, fell to 3.7%.
Those rates are still some way above those seen this summer, but will come as a relief to the government whose September borrowing figures were the second highest on record.
It may also bode well for the mortgage market, where rates have shot up to 14-year highs following the recent turmoil.
On Monday, the deputy governor for markets and banking at the Bank of England, Sir Dave Ramsden, said the recent improvement in bond yields had shown that "credibility is returning to British economic policy".