The Dow Jones Industrial Average fell on Monday as the S&P 500 headed for a new closing low for the year following surging interest rates and foreign currency turmoil.
The Dow dropped 290 points, or 1%. The S&P 500 declined 0.9%, and the Nasdaq Composite slipped 0.5%.
The British pound dropped to a record low on Monday against the U.S. dollar, falling 4% at one point to an all-time low of $1.0382.
The pound has since come off its worst levels on speculation that the Bank of England may have to raise rates more aggressively to tamp down inflation.
The Federal Reserve’s aggressive hiking campaign, coupled with U.K.’s tax cuts announced last week has caused the U.S. dollar to surge.
The euro hit the lowest versus the dollar since 2002. A surging greenback can hurt the profits of U.S. multinationals and also wreak havoc on global trade, with so much of it transacted in dollars.
“Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” wrote Morgan Stanley’s Michael Wilson, chief U.S. equity strategist, in a note. “If there was ever a time to be on the lookout for something to break, this would be it.”