THE POUND SLUMPED to a fresh 31-year low against the dollar today while Asian equity markets tumbled as the negative effects of the Brexit vote sent traders fleeing to safety.
With last week’s global rally – inspired by promises of central bank stimulus after the poll – consigned to history, high-risk assets such as emerging currencies and oil have also been sent tumbling as fears begin to kick in.
The pound sank to $1.2829, its lowest level since mid-1985, while Japan’s Nikkei stock index dived 3% and Hong Kong and Seoul each shed more than 2%. Sydney slipped 1.4%.
The pound is now worth €1.13, close to lows felt in 2013. That means that Irish tourists or shoppers up north will get 86 pence for a euro.
“Investor sentiment soured over the 4 July long weekend,” said Stephen Innes, senior trader at OANDA Asia Pacific, in a note.
“Just when you thought it was safe to go back in the water, the pound got pounded as speculation around Brexit forms into something more concrete.”
Selling
Hefty selling began in Europe yesterday afternoon when the head of the Bank of England said there was “evidence that some risks have begun to crystallise” following the 23 June vote for Britain to leave the European Union.
A biannual report from the bank’s Financial Policy Committee said the outlook for the country’s financial stability was “challenging”.
The BoE also relaxed commercial banks’ capital requirements to boost lending, which analysts said indicated it was prepared to further loosen monetary policy to support the British economy.
The measure provided support to London stocks, but was unable to prevent a sell-off across the rest of Europe and New York.
Adding to the sense of panic was news that three commercial property funds worth billions of dollars had suspended trade and blocked client redemptions.
The moves come as fears grow that the vote will lead companies — particularly banks in London — to shift operations from Britain, fuelling a surge in selling and a slump in prices.
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