Surging pound stumbles as Brexit vote draws closer

 21 Jun 2016 - 8:10

Surging pound stumbles as Brexit vote draws closer
People walk through the lobby of the London Stock Exchange in London, Britain August 25, 2015.


Tokyo: The pound slipped on Tuesday after its best one-day gain since the 2008 global financial crisis, with Britain's nailbiting vote on its future in the European Union just days away.

Polls suggest the race is tight and could go either way when Britons cast their ballot in an historic vote on Thursday that will decide whether the country stays or leaves the 28-member EU.

The pound has been on a see-saw as the referendum approaches, with critics of a so-called Brexit warning that leaving could spell disaster for Britain's prospects.

"It is difficult to take long positions now ahead of the vote," said Minori Uchida, head of Tokyo global markets research at Bank of Tokyo-Mitsubishi UFJ.

In Tokyo, the pound edged down to $1.4657 from $1.4675 in New York, where it had jumped 2.4 percent to $1.4708 at one stage, its biggest daily gain in years.

The 'Remain' camp on Monday won support from investor George Soros who warned that an exit vote would spell economic doom for Britain.

Soros made a billion pounds by betting against sterling in a 1992 currency crisis that became known as Black Wednesday.

"Sterling is almost certain to fall steeply and quickly if leave wins the referendum," Soros wrote in The Guardian.

"I would expect this devaluation to be bigger and also more disruptive than the 15 percent devaluation that occurred in September 1992."

In other trading, the euro rose to $1.1333 and 117.90 yen from $1.1311 and 117.55 yen in New York.

The dollar edged up to 104.02 yen from 103.93 yen.

Earlier Tuesday, Japan's Finance Minister Taro Aso hinted that Tokyo was not planning an imminent market intervention to weaken the yen.

The remarks come after Japanese officials - including Aso -- repeatedly said that a move was a strong possibility as the surging yen threatened Japan Inc's profits.

An intervention is diplomatically sensitive, however, because it risks putting Tokyo on a collision course with G20 counterparts that agreed not to interfere in forex markets.

"We won't do a foreign exchange intervention without careful consideration," Aso told reporters.

Markets are now looking to Federal Reserve Chair Janet Yellen's semi-annual congressional testimony on Tuesday and Wednesday, as investors try to gauge when the Fed will lift borrowing costs again.

"We're also looking to Yellen's comments since the market is now questioning when exactly the US will raise interest rates," Uchida said.

The US central bank stood pat on policy last week in part due to Brexit concerns, and lowered its path for US rate hikes.