Sterling falls to 8-week low on Brexit anxiety, yen gains broadly

[TOKYO] The British pound fell to an eight-week low against the US dollar on Monday amid trepidation ahead of a referendum that could push Britain out of the European Union, while the yen gained broadly as the mood turned sombre after Sunday's mass shooting in the United States.

The British pound, which lost 1.4 per cent on Friday, its second biggest fall so far this year, shed another 0.2 per cent in early Asian trade to US$1.4208. It fell to as low as US$1.4159, its weakest since April 18.

"The referendum is getting nearer and opinion polls are showing a very tight race," said Shin Kadota, chief FX strategist at Barclays.

Implied volatilities on sterling soared as market players felt the need for protection against the currency's fall. Three-month pound volatility shot up to 17.2 per cent, its highest level since early 2009.

Opinion polls published during the weekend showed voters were still divided over whether to end Britain's European Union membership.

The pound also hit a one-month low against the euro, which rose to as high as 79.355 pence. It last stood at 79.135.

The safe-haven yen meanwhile surged to its highest level in three years against both sterling and the euro as investors sought shelter in the Japanese currency with sentiment taking a further battering following a mass shooting in the United States on Sunday.

The sterling hit a near three-year low of 150.68 yen, while the euro also slipped to a three-year nadir of 119.52 yen.

The US dollar lost 0.4 per cent to 106.60 yen, edging near one-month low of 106.26 touched last Thursday.

While many market players think the Bank of Japan will keep its policy on hold at its meeting on June 15-16, that perception could change if the US dollar falls below its 18-month low of 105.55 set on May 3.

The euro slipped to US$1.12475, its lowest since June 3, giving up more than a half its gains made after disappointing US employment data on that day.

The safe-haven Swiss franc held firm, hitting its highest level against the euro in three months.

It stood at 1.0840 franc per euro, having lost 2.2 per cent last week, its biggest weekly fall since January 2015, when the Swiss National Bank suddenly scrapped its floor for the currency pair.

REUTERS