Sterling gets pounded again on Brexit fears
Sterling got no respite from a relentless sell-off yesterday, falling below $1.40 for the first time since the height of the financial crisis in 2009 as investor concerns about a possible British exit from the European Union persisted.
A fall in oil prices, after Saudi Arabia ruled out production cuts, drove a risk-averse mood across markets that boosted demand for the safe-haven Japanese yen and Swiss franc and gave traders yet another reason to sell sterling.
The pound has fallen almost 3pc in as many days putting it on track for its worst week in David Cameron's six years as prime minister, following a weekend during which several senior members of his Conservative party threw their weight behind the campaign to leave Europe.
"The factors are the same as the ones we were talking about earlier in the week," said Rabobank currency strategist Jane Foley. "But the (referendum) polls are still extremely close... and the only thing that could have really lent sterling support would have been if the 'remain' campaign was coming ahead with a big margin, which it's not."
The euro also fell against the dollar. "The euro is also getting dragged down a bit by the EU concerns, so if you're looking for a safe haven you're probably... more likely to choose the yen," Foley added.
The dollar was expected to have an edge over the yen at the start of the year, when the US Federal Reserve was expected to embark on a series of interest rate hikes after making its first in almost a decade in December.
But recent market volatility has tempered those hike expectations, also enhancing the yen's appeal, which the Bank of Japan's shock adoption of negative interest rates in late January has not arrested.
Global shares fell sharply yesterday after oil dropped after Saudi Arabia effectively ruled out output cuts by major producers.
Top-rated government bonds were in demand as the prospect of persistently low oil prices, raised concerns about weak global economic growth.
The pan-European FTSEurofirst 300 share index fell 2.3pc, led lower by commodity-related stocks, which fell nearly 6pc. Britain's FTSE 100 index lost 1.5pc while in Dublin the Iseq index of Irish shares was down 0.92pc by late afternoon 6,052.92.
Bank stocks were among the worst hit - Permanent TSB fell 6.8pc to €2.48 and Bank of Ireland shares dropped to 23.3 cents, a near 4pc fall. On the flip-side of the afternoon trading, Providence Resources was among the gainers, up 9.5pc to 20.26 cents.