Pound tumbles as much as 1.1% after polls show Brexit favoured

[TOKYO] The pound slumped as much as 1.1 per cent after weekend polls showed Britons favour exiting the European Union, spooking some investors who have been betting the UK would vote to stay.

Sterling weakened against all its 16 major peers after two surveys showed more voters were willing to vote to leave the EU than those ready to stay. The US dollar rebounded and the Australian and New Zealand currencies retreated.

The Bank of England has said uncertainty surrounding the referendum vote is damping UK growth, while international institutions including the International Monetary Fund and the Organisation for Economic Cooperation and Development are warning of dire fallout if Britain votes to quit the EU.

Federal Reserve Bank of Chicago President Charles Evans said the referendum is undermining confidence in the outlook at a time when the international economy is already losing momentum.

"If there's any one currency investors may want to go short on besides paring long-dollar positions that would be sterling," said Vishnu Varathan, an economist at Mizuho Bank Ltd in Singapore.

"Sterling very much remains on the back foot."

A YouGov poll for ITV found 45 per cent would choose 'Leave', compared with 41 per cent picking 'Remain'. A separate survey by TNS showed 43 per cent for 'Leave' and 41 per cent for 'Remain'.

With the referendum scheduled for June 23, expectations for swings against the US dollar during the next month surged to a seven-year high.

The pound was 0.8 per cent weaker at US$1.4399 as of as of 9:59 am in Tokyo after sliding to US$1.4353, the lowest since May 16. One-month implied volatility in the pound-dollar pair surged to 21.4 per cent Monday, the most since February 2009.

Cameron Pressured

The polls increase the pressure on Prime Minister David Cameron in a battle that has split the ruling Conservative Party. Chancellor of the Exchequer George Osborne has stepped up warnings of the economic consequences of a pullout from the EU.

Mr Cameron hit back Monday with a joint letter signed by senior figures from other political parties accusing the Leave campaign of perpetrating an "economic con-trick" on the public.

That warning came a day after former Prime Minister John Major took to the airwaves to condemn the "squalid" Brexit campaign and dismissed its most prominent supporter, former London Mayor Boris Johnson, as a "court jester".

The US dollar strengthened after dropping on Friday when the US reported the weakest jobs growth in almost six years. The Bloomberg Dollar Spot Index climbed 0.2 per cent, after sliding 1.5 per cent at the end of last week.

Futures indicate just 4 per cent odds that the Fed will raise interest at its June 14-15 meeting, from 30 per cent at the start of last week. The odds of a July move have dropped to 27 per cent from 54 per cent.

The Australian dollar tumbled 0.5 per cent and the New Zealand currency retreated 0.3 per cent.

BLOOMBERG