[HONG KONG] Investors trod a cautious line on Wednesday, a day before Britain's high-stakes referendum on its future in the European Union, with the head of the Federal Reserve warning a vote to leave could hammer world markets.
After a three-day rally fuelled by hopes the country will stay in the economic bloc, analysts said traders were taking a step back to see what happens in Thursday's poll.
While bookmakers say there is an 80 per cent chance the country will stick with the status quo, opinion polls predict a dead heat, with about 10 percent of voters yet to decide which way to go.
"It would be logical for markets to begin losing momentum and volume while they wait on the outcome of the Brexit vote," Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail to clients.
"Short-term traders cannot be blind to the risks that despite recent confidence high volatility and short-term illiquidity remain a possibility as the results of the Brexit vote unfold," he said, according to Bloomberg News.
Tokyo's Nikkei ended the morning session one per cent lower, while in the morning Hong Kong was off 0.4 per cent and Sydney shed 0.1 per cent.
Shanghai edged up 0.1 per cent, Seoul gained 0.2 per cent and Singapore 0.5 percent.
The pound, which has rallied this week with hopes for a vote to remain, edged up to US$1.4685 from US$1.4628 in New York, where it touched a five-month high of US$1.4783 at one point.
European Commission President Jean-Claude Juncker said a British exit would be "an act of self-harm" that would endanger everything Europeans had worked together to achieve.
Later, Fed boss Janet Yellen also warned of the dangers of an out vote, saying it would likely send shockwaves through already fragile global markets, which are struggling to recover from the January-February China-fuelled rout.
Appearing before a congressional panel, she said leaving the EU would have "significant economic repercussions" and could rupture what she called "a very important relationship" between Britain and the European continent.
Away from the EU vote, she also said US growth had picked up noticeably in the second quarter after a weak start to the year but added it had been uneven and clear downside risks remain.