Pound down again after nosediving to lowest since 1985

Pound down again after nosediving to lowest since 1985

The British pound lost further ground versus the U.S. dollar and euro overnight into Thursday, as the coronavirus pandemic sends the currency reeling to its lowest levels in more than three decades against the greenback.

The pound was last down 0.9%, changing hands just above $1.15.

Sterling had edged to a low of $1.1450 in New York trading on Wednesday and has plummeted more than 12% against the strengthening dollar over eight brutal days of trading.

It has not been this weak since 1985, when the Plaza Accord was signed by the world's richest nations to weaken the dollar and drag the U.S. economy out of recession.

Against the euro on Thursday, the pound touched a fresh 11-year low of 95 pence per euro, before later recovering some ground. It was last down 0.2% against the single currency.

Expected volatility gauges for sterling against the dollar leapt to their highest level since before the 2016 Brexit vote on Thursday as jitters remained.

Markets have been roiled by growing fears over the impact of the coronavirus pandemic.

Britain tightened restrictions further on Thursday by ordering schools to shut down after another rise in coronavirus cases.

Sterling has been one of several currencies to tank as investors rush to put their money in U.S. dollars, the world's most liquid currency and seen as a safe haven in times of crisis.

Morten Lund, senior FX strategist at Nordea, said he believed the pound had further to fall and could hit $1.10 as well as parity against the euro.

Concerns over Britain's current account deficit and uncertainty over the country's trading relations after Brexit have exacerbated the pound's declines, he said.

"I've been very negative on sterling throughout all this and I don't think this general market sell-off is over.

"There are not many out there that want sterling as a reserve currency, and at the moment everyone wants to be long safe assets including dollars."

Several dollar auctions have been held by central banks around the world including the Bank of England this week as part of coordinated action to try to ease strains in money markets.

The Bank of England's new governor Andrew Bailey said on Wednesday it was open to more emergency measures.

Analysts at ING said the sharp falls in sterling meant it was behaving more like an emerging market currency, adding that it was among several currencies squashed by the "armour-plated steamroller" of the U.S. dollar. (Reuters)

Source: www.businessworld.ie