Sterling pares losses after hitting 31-year low on Brexit

Fri Jun 24, 2016 4:15pm EDT
 
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By Sam Forgione

NEW YORK (Reuters) - Sterling edged off lows against the U.S. dollar on Friday, recovering slightly from a 10 percent plunge to its weakest in 31 years following Britain's vote to leave the European Union, on reassuring statements from central banks.

Sterling GBP=D4 was last down 8.1 percent against the dollar, at $1.3662, after touching its weakest since before the 1985 Plaza Accord of $1.3228. Traders said Bank of England chief Mark Carney's comments that the central bank stood ready to provide extra support helped sterling recover.

Despite the smaller losses, the currency was on track to post a 4.9 percent decline for the week against the dollar, which would mark its biggest weekly loss since January 2009. Sterling had touched $1.5018, its highest since mid-December, in Asian trading ahead of the result after polling firm YouGov said the campaign to keep Britain in the EU appeared to be ahead.

While the dollar gained against sterling because of its relative safety, investors favored the yen over the greenback, the euro, and sterling for its even greater perceived safety.

Sterling was last down 11.4 percent against the yen GBPJPY= at 139.64 yen after falling as low as 133.38 yen, its lowest in roughly three and a half years. The dollar also pared losses against the yen after touching a more than two-and-a-half- year low of 99.11 yen JPY=, but was still down 3.6 percent at 102.27 yen in afternoon U.S. trading.

While the dollar was last on track for its biggest one-day percentage drop against the yen since October 2008, speculation that the Bank of Japan could also act limited the yen's advance. Japanese Finance Minister Taro Aso said that excess volatility in currency markets was undesirable and he would respond to market moves when necessary.

"Central banks have been out trying to reassure the market, and this has caused the market to pause and reflect," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.

The euro EUR= pared losses against the dollar after touching its lowest level against the greenback in three and a half months of $1.0914, but was still hobbling and last down 2.5 percent at $1.1100.   Continued...

 
A board above the floor of the New York Stock Exchange (NYSE) shows the current standing of the British Pound sterling and the Euro, in New York, U.S., June 24, 2016.  REUTERS/Lucas Jackson