[TOKYO] The US dollar and yen steadied and sterling crawled away from a 31-year low on Tuesday as risk aversion triggered by the shock of Brexit eased slightly, although many investors were still wary of calling a bottom for the battered pound.
The euro was little changed at US$1.1042, having put a bit of distance from Friday's three-month low of US$1.0912. The pair was confined between US$1.1054-1.1010, its narrowest intraday range in nearly three weeks.
The greenback also moved in tight range against its safe-have Japanese counterpart, standing virtually flat at 102.04 yen.
On Friday the US dollar had fallen to 99.00 yen, its lowest since late 2013, when it became clear that Britain had opted to leave the European Union.
"The fallout from Brexit had held sway through yesterday's European and North American sessions, sending the pound even lower. But for now, the market is experiencing a lull in absence of fresh factors and US dollar/yen appears to be holding out well," said Kyosuke Suzuki, director of forex in Japan for Societe Generale.
The pound inched up 0.5 per cent to US$1.3298. Having skidded from highs near US$1.5000 on Friday, the pound fell as far as US$1.3122 overnight, reaching a low not seen since 1985.
In the latest blow for Britain, ratings agencies Standard & Poor's and Fitch downgraded its sovereign credit standing, judging last Friday's vote to leave the European Union would hurt the economy.
"While the USD and JPY have retained their safe haven status, the lack of clarity on the future relationship between the UK and Europe suggests that the GBP adjustment still has more to go," said Rodrigo Catril, currency strategist at National Australia Bank.
"Markets remain sensitive to Brexit headlines and in a day devoid of major data releases, the two-day EU Leaders summit commencing later today has the potential to be a weighty source of market volatility."
Central bank policy makers from across the globe have an opportunity to soothe frayed market nerves at a European Central Bank Forum in Portugal as well.
ECB President Mario Draghi is due to speak on "The future of the international monetary and financial architecture" later in the day. On Wednesday, Federal Reserve Chair Janet Yellen participates in a panel.
Against the yen, sterling was up 0.6 per cent at 135.75, scraping out some breathing space between a 3-1/2 year trough of 133.18 plumbed Friday. The euro fell 0.6 per cent to 82.99 pence, after scaling a two-year peak of 83.79 pence overnight.
The Australian dollar, sensitive to shifts in risk sentiment, added 0.7 per cent to US$0.7380 but it was still well below last week's high of US$0.7650.
For more coverage of the EU referendum, visit bt.sg/BrexiT