While higher rates are typically supportive of currencies, the risk that they will trigger an economic downturn has pushed some investors to seek safe-haven assets including the U.S. dollar.
The pound fell 0.31% to $1.2710 and was on track for a weekly loss of nearly 1%, snapping three straight weeks of gains. "With the Bank of England set to raise rates substantially further, we expect the UK economy to come under renewed pressure by late 2023, and look for growth to either stagnate or even for the economy to contract," said Nick Bennenbroek, international economist at Wells Fargo.The Aussie fell 1% to $0.6688 and was headed for a weekly loss of more than 2.5%, its worst week since March. The kiwi slid 0.58% to $0.6141, down about 1.5% for the week.
Rate hike surprises and hawkish comments from central banks globally have renewed market fears that policymakers have further to go in tightening policy to tame inflation, even at the risk of tipping their economies into a recession.