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Pound at 30-year low in post-Brexit fallout

/ 09:17 AM June 27, 2016

Pound Sterling

TOKYO, Japan — The pound was sitting at three-decade lows Monday morning as currency markets were left reeling from Britain’s shock decision to leave the European Union.

Sterling collapsed to its lowest level since 1985 on Friday ahead of official referendum results as early numbers suggested that the vote would surprise markets, which had widely expected voters to opt for the status quo.

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On Monday morning in Tokyo, the pound was at $1.3379, off $1.3670 in New York but still above $1.3229, its lowest point earlier Friday.

READ: Pound dives as Brexit vote rattles forex market | Pound, Asia markets collapse as Britain quits EU

“People are finding it difficult to comprehend what Brexit implies for the future — we don’t know yet what the magnitude of the shock will be,” Steven Barrow, head of Group-of-10 strategy at Standard Bank Group in London, told Bloomberg News.

The euro bought 82.07 pence against 81.31 pence, while the dollar ticked up to 102.34 yen, from 102.21 yen on Friday.

Japan’s currency surged Friday as traders scooped up the safe-haven unit, seen as a safe bet in times of turmoil.

But the rally in the yen, which had already been on the upswing before the vote, poses a threat to profits at major Japanese exporters.

And Britain’s vote to leave the EU could have significant consequences for more than 1,000 Japanese firms that operate in Britain — many of which see it as a staging point for dealing in Europe.

“It was very regrettable,” Sadayuki Sakakibara, chair of Keidanren, Japan’s biggest business lobby, said of the result on Friday.

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Japanese Prime Minister Shinzo Abe held an emergency meeting with top officials Monday morning to discuss Brexit and how to deal with the market fallout.

Ahead of the meeting, Abe pointed to unspecified measures to smooth out any impact on the world’s number three economy.

“We will make thorough efforts so that (Brexit) will not negatively affect Japan’s economy and the business of small to medium-sized firms,” he said, without elaborating.

On Friday, Finance Minister Taro Aso pledged that Tokyo was ready to adopt strong measures to address wild volatility on financial markets.

His remarks hinted at a possible market intervention to cool the surging yen.

Recently, Japanese officials, including Aso, have been warning over the yen’s rise and said an intervention was possible. However, such a move could put Japan on a collision course with its G20 counterparts, who have agreed to hold off stepping into forex markets to manipulate their currencies.

Officials from the Bank of Japan (BoJ) were at the meeting on Monday. The BoJ has said it was ready to lean on a currency swap agreement it has with other major central banks to supply liquidity for markets in an effort to counter the wild volatility.

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TAGS: Brexit, Britain, Business, currency, EU, European Union, pound, sterling, United Kingdom
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