Pound remains under siege, jittery start to week after Brexit

By Reuters/Shinichi Saoshiro   June 27, 2016 | 08:40 am GMT+7
Pound remains under siege, jittery start to week after Brexit
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2016. Photo by Reuters/Lucas Jackson

The pound remained under siege on Monday, sliding back toward a 31-year low as sentiment towards the currency remained in tatters after Britain opted to exit the European Union, triggering shockwaves across global markets.

Sterling was down 1.8 percent at $1.3460, within shot of $1.3228 plumbed on Friday, its lowest since 1985. The pound dropped as much as 11 percent on Friday as positions betting on Britain remaining in the EU were reversed en masse.

The impact from Brexit - which also generated much turmoil in global equity, commodity and bond markets - was expected to grow due to its likely negative effect on the European economic and political landscape.

"The focus now falls on Europe, where Brexit could cause a domino effect of states wanting to leave the union. While this has already been talked about, the main concern for the currency market is European political uncertainty leading to monetary and fiscal policy paralysis," said Junichi Ishikawa, forex analyst at IG Securities in Tokyo.

"As for the pound, it could probe fresh lows. The currency could fall further as the Bank of England may cut interests to support its economy in the wake of Brexit."

Many economists forecast Brexit would at least temporarily reduce UK growth.

The pound was down 1.9 percent against the Japanese currency at 137.50 yen after reaching a 3-1/2-year low of 133.65 on Friday.

The safe-haven yen was also bullish against the dollar. The greenback was steady at 102.080 yen. The U.S. currency shed 1.8 percent last week when it weakened to as much as 99 yen, its lowest since November 2013.

pound-remains-under-siege-jittery-start-to-week-after-brexit

An employees of a foreign exchange trading company works in front of monitors displaying television news on Britain's EU referendum and the Japanese yen's exchange rate against British pound (L) in Tokyo, Japan, June 24, 2016. Photo by Reuters/Issei Kato

Market focus was on whether Japan would intervene to arrest the yen's appreciation should the currency gain further.

The Japanese authorities have so far limited their action to verbal warnings.

Japanese Prime Minister Shinzo Abe said on Monday he has instructed Finance Minister Taro Aso to watch currency markets "ever more closely" and take steps if necessary, four days after Britain's historic vote to leave the EU.

The euro was down 0.6 percent at $1.1045 but some distance from $1.0912, a three-month low reached on Friday.

The Australian dollar, vulnerable in times of risk aversion, slipped 0.3 percent to $0.7435 after losing more than 2 percent on Friday. 

Related news:

> Britain decides to leave the European Union, sterling suffers biggest ever fall

> Global markets wrap up: Asia shares pause, sterling stands tall as Brexit vote looms