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Sterling hits 31-year low on Brexit vote aftermath, euro slides
[NEW YORK] The British pound fell to a 31-year low against the US dollar on Monday on anxiety over the aftermath of Britain's decision to quit the European Union, while the euro also dipped.
Sterling hit US$1.3151, its lowest level since mid-1985 and marking an 11.5 per cent fall from the currency's closing level on June 23, the day of the referendum. Analysts predicted more downside for sterling as traders monitored the fallout of the vote and how it would affect the European economy.
Sterling was last down 3.6 per cent at US$1.3209, failing to recover despite British finance minister George Osborne's assurances that the economy was in good shape and that the government and Bank of England could implement further actions if needed.
The euro also remained weak, last down 1.1 per cent at US$1.0996 after hitting a session low of US$1.0971. That session low remained slightly above Friday's 3-1/2 month low of US$1.0909.
"By no means is the collapse of the cable over," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, referring to the sterling/dollar exchange rate. "The trade in the pound continues to be on the downside until the market gets some sort of resolution."
A likely fresh move for Scottish secession, and the response of the EU and its ability to contain calls by anti-EU parties across the continent, in part combined to make matters worse for sterling.
Analysts said sterling had further room to fall since markets were reluctant to act in response to the referendum vote and were in a "wait and see" mode ahead of reactions from European policymakers.
"This has such long-dated implications that investors are behaving somewhat cautiously," said Richard Cochinos, head of European G10 FX strategy in London. "The markets are really watching the European reaction," he said, noting Tuesday's European Council summit in Brussels on Tuesday as one event that traders would likely watch closely.
The yen gained on safe-haven demand, though expectations that the Bank of Japan could intervene to halt the currency's rise limited its advance. The dollar was last down 0.66 per cent against the yen, at 101.52, holding above Friday's more than 2-1/2 year low of just above 99 yen.
The dollar index, which measures the greenback against a basket of six major currencies, was last up 1 per cent at 96.408.
For more coverage of the EU referendum, visit bt.sg/BrexiT