The pound gained against the dollar in early Asia trading on Monday after calls grew for the resignation of UK prime minister Liz Truss following a series of damaging U-turns on her government’s “mini” Budget.

Sterling rose as much as 0.9 per cent to $1.127 on Monday after falling 1.4 per cent on Friday as investors said the prime minister’s moves to sack Chancellor Kwasi Kwarteng and drop plans to slash corporate taxes were not enough.

The buoyancy in the pound’s exchange rate with the dollar during early Asia trading came after growing calls from Conservative MPs and business figures for Truss’s resignation over the weekend, with a number of cabinet ministers seeking to drum up support for potential leadership contenders.

Truss announced on Friday that Jeremy Hunt, the former foreign secretary, would become her new finance minister. She acknowledged that last month’s “mini” Budget containing £45bn of unfunded tax cuts “went further and faster than markets were expecting”.

But sterling remains down about 17 per cent this year, and analysts have warned that UK government bonds remain vulnerable after the Bank of England on Friday ended its bond-buying programme, which had served to backstop the market and support the pound.

Goldman Sachs on Sunday also cut its forecast for UK economic growth and warned that it now expected a more significant recession, flagging “weaker growth momentum, significantly tighter financial conditions, and the higher corporation tax from next April”.

“There’s an expectation that if Truss is pushed out, it will draw a line under this fiscal debacle and a new government will be able to reassure markets and the public,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore.

But he added that the end of the Bank of England’s gilt purchases meant that if Truss refused to resign, sterling would reverse its gains.

The 30-year yield on gilts ended the week higher at 4.8 per cent after falling to as low as 4.2 per cent on Friday, as the BoE purchased only £1.4bn of gilts in the final round of its emergency intervention, which had helped stem a liquidity crisis in the country’s pensions industry.

The total £19bn in purchases during recent weeks also fell far short of the £65bn ceiling set by the BoE for the programme.

“We’ve come to a very important turning point in the next 24 hours,” Mohi-uddin said. “The prime minister can stay on and markets will become volatile again, or if she’s forced out there might be a period of a few days of calm. But all the underlying negative fundamentals, unfortunately, remain in place.”

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