Pound falls as poll shows Conservatives may fail to win majority

London

THE pound dropped to a more than five-week low after a projection showing Theresa May's Conservative Party may fall short of majority in next week's election raised the spectre of a hung parliament.

The British currency weakened versus all its Group-of-10 peers as the currency bore the brunt of increasing market jitters before the vote. The YouGov Plc study in the Times, based on a new model, showed the prime minister's party may fall short of an overall majority by 16 seats - a contrast from just a few weeks ago when a solid Tory victory was seen as a foregone conclusion. The currency's drop "is another example of markets not being prepared for a close election, let alone a hung parliament", said Sean Callow, a senior currency strategist at Westpac Banking Corp, the second most-accurate major currencies forecaster in Bloomberg's latest ranking. "Speculative short positions have been unwound, leaving sterling looking for fresh direction. So speculators may reload short-pound positions if the election is indeed a lot closer than was implied by the sharp rally when the election was announced." The pound fell 0.5 per cent to US$1.2791 as at 9.56 am in London on Wednesday, after earlier touching US$1.2769, the lowest since April 21. Still, declines were limited as traders, who've been burnt in the past by the wavering reliability of polls, treated the latest survey with a degree of scepticism.