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US dollar surges vs pound as 'Brexit' fears rise

Saturday, June 11, 2016 - 10:41
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The pound sank and the euro fell with it Friday as investors sought shelter in the US dollar amid fears that Britain will vote to exit the European Union this month.

[NEW YORK] The pound sank and the euro fell with it Friday as investors sought shelter in the US dollar amid fears that Britain will vote to exit the European Union this month.

A new poll showed a growing majority of the British people in favor of leaving the 28-nation EU, shaking foreign exchange and stock markets.

The London newspaper The Independent said the survey showed 55 per cent back "Brexit", the largest share since research firm ORB began polling the issue last year.

The pound sank 1.4 per cent to US$1.4250. The dollar rose 0.6 per cent to US$1.1251 per euro.

With the approaching June 23 referendum, as well as Federal Reserve policy meeting on Tuesday and Wednesday, "market volatility is very likely to ratchet up," said Christopher Vecchio, currency analyst at DailyFX.

"Being in the market right now is like sitting on the beach after a day in the sun, but knowing full-well that there are dark storm clouds approaching quickly on the horizon," he said. "It's a matter of time before the downpour begins.

The yen, seen as a haven amid the uncertainty, gained against both the dollar and the euro. The Bank of Japan issues its rate decision on Thursday.

Most analysts believe the Fed will leave interest rates unchanged, especially after a dismal May jobs report and before the Brexit vote.

"With an interest rate hike seemingly off the table this month, market participants will scrutinise the Fed's updated economic projections, statement and press conference for any guidance on the overall path of monetary policy," said Eric Viloria, currency strategist at Wells Fargo Securities.

AFP