Investing.com - Sterling fell to the lowest levels since October’s flash crash on Monday as investors fretted over Brexit, while the safe haven yen gained ground amid uncertainty over president-elect Donald Trump’s plans to boost the U.S. economy.
GBP/USD hit lows of 1.1988, falling below the 1.20 level for the first time since October’s flash crash, before pulling back to 1.2052, off 0.99% for the day.
The pair hit lows of 1.1841 on October 7, the lowest level since 1985.
The fall in the pound came ahead of a speech by U.K. Prime Minister Theresa May on Tuesday where she is expected to outline plans for Britain’s exit from the European Union.
Investors fear that May will outline plans to sacrifice access to the single market and the customs union in order to regain control over immigration and bilateral trade deals in a so-called "hard Brexit".
Sterling had already weakened broadly last week after May said that the U.K. would not be able to keep "bits" of its EU membership after Brexit.
A spokeswoman for the prime minister said Monday that reports that she will unveil plans for a "hard Brexit” in the speech are "speculation".
Sterling found some support after U.S. President-elect Donald Trump said in a newspaper interview that he welcomed Britain's decision to leave the EU and added that he will offer the U.K. a “fair” trade deal.
The pound hit nine-week lows against the euro, with EUR/GBP touching an intra-day high of 0.8852 before pulling back to trade at 0.8794, up 0.68% for the day.
Sterling hit two-month lows against the traditional safe haven yen, with GBP/JPY down 1.38% at 137.55.
Meanwhile, the dollar fell to its lowest levels since early December against the Japanese currency as investors looked ahead to Donald Trump's inauguration on Friday amid a lack of clarity on his economic policies.
USD/JPY hit lows of 113.63, the weakest since December 8 and was last at 114.12, down 0.37% for the day.
Uncertainty over the incoming Trump administration’s plans for fiscal stimulus, deregulation and tax cuts, as well as the fall in the pound continued to dominate market sentiment.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, climbed 0.42% to 101.59, boosted by weakness in the euro. EUR/USD was down 0.43% at 1.0598.
The rebound in the dollar index came after it posted its largest weekly decline since late October last week, shedding 1.0%, after Trump disappointed traders who had been hoping he would address economic and fiscal policies in his first formal news conference as U.S. president-elect.
Trade volumes were expected to remain thin on Monday, with U.S. financial markets shut for Martin Luther King Day.