£ plunges to fresh seven-year low on Brexit uncertainty
The pound on Wednesday fell below $1.40 to a fresh seven-year low on growing worries that Britain may vote to leave the European Union, as Prime Minister David Cameron ramps up his bid to stay in the 28-nation bloc.
Sterling briefly dropped as low as $1.3975 in morning Tokyo trade, its lowest since March 2009. Britain's currency has been under pressure since Cameron's deal with the EU to avoid a "Brexit" last week was handed a setback as popular London Mayor Boris Johnson declared his support for the exit campaign in the June 23 referendum.
Six members of Cameron's cabinet announced they would support leaving, a move that underscored rifts in the ruling Tory Party. Cameron has pushed back, warning that a vote to leave the EU would risk the country's economic and national security. On Tuesday, the bosses of more than a third of Britain's top companies urged voters to keep the country in the EU, warning that an exit would threaten jobs.
"'Brexit' is certainly weighing on the pound," said Daniel Brehon, a currency strategist at Deutsche Bank. "But structural concerns such as the current-account deficit were already a problem beforehand," he added. In other trading, turmoil on global markets, falling oil prices and worries about China's economy are supporting the yen as investors look for assets seen as safe bets.
On Wednesday, the dollar weakened further to 111.98 yen from 112.08 yen in New York. "We need to be wary of dollar-yen breaking below 110 this week," Masato Yanagiya, head of foreign-exchange and money trading at Sumitomo Mitsui Banking, told Bloomberg News.
"The yen bears are gone." The euro, meanwhile, slipped to 123.21 yen from 123.49 yen in US trading and $1.1003 from $1.1017. The common currency has been hit by uncertainty over Britain's EU vote and suffered selling after the yesterday's release of weak German business confidence data. The Ifo economic institute said sentiment in Europe's biggest economy dropped for a third month in February to its lowest level in more than a year.