Business World

Thursday 27 April 2017

Sterling falls in Asia over hard Brexit fears

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, January 4, 2017. REUTERS/Staff/Remote
Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, January 4, 2017. REUTERS/Staff/Remote

Wayne Cole

Sterling slid to three-month lows in Asia on Monday with investors spooked anew by concerns over Britain's divorce from the European Union, while US policy uncertainty lingered ahead of President-elect Donald Trump's inauguration.

Regional share markets were hesitant. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.5pc, Japan's Nikkei lost 0.6pc and Shanghai shed 1.4pc.

Spread betters pointed to likely opening gains for UK shares, but a drop for German equities.

All the early action was in currencies where the pound sank as low as $1.1983, depths not seen since the flash crash of October, having finished around $1.2175 in New York on Friday. It was last down 1.2pc at $1.2032.

Dealers said the market was reacting in part to a report in the Sunday Times that UK Prime Minister Theresa May will use a speech on Tuesday to signal plans for a "hard Brexit", quitting the EU's single market to regain control of Britain's borders.

Investors have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

"It is impossible to say by how much a hard Brexit could weaken GBP, but we do not believe that a further 5-10pc depreciation should be regarded as an extreme scenario when set aside the UK's high dependence on foreign capital," wrote analysts at JPMorgan in a note.

The flight from sterling benefited the safe-haven Japanese yen, with the pound down 1.5pc to 137.34 yen while the US dollar dipped to 114.17 Against a basket of currencies, the dollar was up 0.3pc at 101.510.

The euro pared initial losses to stand at $1.0611.

Reuters

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