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Forex - Sterling hits fresh 31-year low on Brexit shock

Published 06/27/2016, 06:55 AM
Updated 06/27/2016, 06:55 AM
© Reuters.  Sterling hits fresh 31-year low on Brexit shock

© Reuters. Sterling hits fresh 31-year low on Brexit shock

Investing.com - The pound fell to fresh 31-year lows against the dollar on Monday as fears over the U.K. vote to exit the European Union continued to grip financial markets.

GBP/USD slumped to lows of 1.3194, the weakest since 1985 and was last at 1.3218, off 3.36% for the day.

Sterling fell as much as 11% against the dollar on Friday in the worst one day decline in recent history.

The pound had briefly steadied earlier following falls in the Asian session after U.K. Chancellor George Osborne sought to reassure markets alarmed over the consequences of Brexit.

Osborne said the vote to leave the EU was likely to lead to further volatility in financial markets but claimed that the economy is as strong as it could be to face the challenges ahead.

Sterling has tumbled amid fears that the decision could hit investment in the U.K. economy, threaten London's role as a global financial capital and trigger months of political uncertainty.

Former London mayor and leading Brexit proponent Boris Johnson is soon expected to declare that he is running to lead the Conservatives, replacing Prime Minister David Cameron who resigned on Friday.

The party is deeply divided between pro- and anti-EU factions, while divisions in the opposition are also deep.

The vote could lead to a breakup of the U.K., with Scotland now highly likely to hold a second independence referendum.

The pound hit fresh two-year lows against the euro, with EUR/GBP advancing 2.66% to 0.8341.

Sterling also extended losses against the yen, with GBP/USD down 4.14% at 133.99, not far from the three-and-a-half year low of 133.65 set on Friday.

The euro remained under pressure against the dollar and the safe haven yen amid fears that the impact of Brexit would cloud the outlook for the EU and the euro area economy.

EUR/USD was down 0.98% at 1.1007, while EUR/JPY fell 1.62% to 111.82.

The dollar fell against the yen, with USD/JPY sliding 0.66% to 101.55, after falling to lows of 99.15 on Friday, the weakest level since November 2013.

Traders remained focused on whether Japan would take any action to weaken the yen if it continues to rise.

Japanese Prime Minister Shinzo Abe told Finance Minister Taro Aso on Monday to watch the exchange rate "ever more closely" and take steps if necessary in the aftermath of the Brexit vote.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.91% at 96.50.

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