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Pound sinks below US$1.30 on Brexit jitters

Thursday, July 7, 2016 - 06:56
38975255 - 05_07_2016 - FILE BRITAIN CURRENCY BREXIT.jpg
The pound sank below US$1.30 on Wednesday as growing worries about Britain's vote to leave the European Union pushed investors toward safe haven assets.

[NEW YORK] The pound sank below US$1.30 on Wednesday as growing worries about Britain's vote to leave the European Union pushed investors toward safe haven assets.

"Sterling hit fresh lows against all of the major currencies and while there was no news to explain the move, the sharp sell-off sent fresh jitters across the financial markets, driving investors into the safety of the US dollar, Japanese yen and gold," said Kathy Lien of BK Asset Management.

The pound sank to US$1.2798 at one point, its lowest level since June 1985, before recovering somewhat. The British currency dropped one per cent against the euro at 85.88 pence.

The euro strengthened slightly against the US dollar, up 0.2 per cent at US$1.1097.

"The eurozone is hardly sheltered from the UK's troubles and there could be a banking sector crisis brewing in Italy but for now, the greater concern is clearly Britain," Ms Lien said in a client note.

The US dollar was little moved by the minutes of the Federal Reserve's June 14-15 policy meeting, which showed Fed officials divided over US growth prospects as they kept rates on hold.

Omer Esiner of Commonwealth Foreign Exchange said the US dollar stands to benefit from continued aversion to risk, but that the outlook for the Fed leaving rates unchanged through 2016 was likely to keep its upside limited.

"Even upcoming economic data, like the all-important payrolls report for June this Friday, may have a limited impact on the US dollar as the Brexit story continues to dominate market focus," he said.

AFP

For more coverage of the EU referendum, visit bt.sg/BrexiT