Pound falls to lowest in 9 months on no-deal fears

London

THE pound fell to the lowest level in more than nine months against the euro amid growing concern that the UK could end up leaving the European Union with no agreement for future economic ties.

Sterling dropped for the third day versus Europe's common currency and weakened against all of its Group-of-10 peers. UK International Trade Secretary Liam Fox said over the weekend that the risk of a no-deal Brexit had increased to as much as 60 per cent.

The pound's weakness versus the euro "is a clear sign that markets are starting to focus on the pound-specific risks associated with a no-deal Brexit," said Viraj Patel, a currency strategist at ING Groep NV.

"We've pencilled in a 0.91-0.92 high over the coming months to reflect peak no-deal Brexit uncertainty."

Investors have turned more bearish on the UK currency as the Brexit deadline approaches, with the latest data from the Commodity Futures Trading Commission showing that both leveraged funds and asset managers continued to increase short positions.

"Right now, we're short of any meaningful news flow, and uncertainty is high - that's not a good thing," said Jordan Rochester, an analyst at Nomura International plc.

"Whilst this Brexit hedging continues to take place and the data are yet to turn materially higher to warrant an early hike from the Bank of England, the pound will be on the back foot and head lower."

The British currency fell as much as 0.6 per cent to 90.17 pence (S$1.58) per euro, the weakest level since Oct 20.

Against the US dollar, it dropped by as much to US$1.2860, an eleven-month low.

The yield on benchmark 10-year government bonds declined one basis point to 1.31 per cent. BLOOMBERG