The pound touched its lowest level since November 2013 against the dollar after opinion polls showed Scotland may vote for separation from the greater U.K.
The sterling fell 1.2 percent to trade at $1.6140 as of 5:54 p.m. in London after earlier touching $1.6103, the weakest level since Nov. 21. It also recorded its biggest intraday drop since July 5, 2013. The pound dropped 1.1 percent to 80.22 pence per euro and fell to 80.37 pence, its lowest level since June 12.
“The market looks to be absorbing wave after wave of sterling selling with no appreciable bounce, and to be honest, why buy it?” Graham Davidson, a London-based foreign-exchange trader at National Australia Bank Ltd, told Bloomberg News. “If they were to vote ‘Yes’ then sterling could drop another 10 percent so the tail risk is big.”
The pound recorded its biggest decline against its U.S. peer in more than a year after a survey by YouGov Plc revealed that the Scottish independence push looked set to sail through for the first time in 2014. The survey revealed that 51 percent of the voters will vote “Yes”, while 49 percent will vote “No”.
After months of polls that indicated that Scotland will likely remain part of the U.K., the results threw the currency markets off-balance. The pound’s one-month implied volatility, which measures the expected swings in the exchange rate used to set prices to options, rose to 9.25 percent, its strongest level since July 2013. This contrasts with a low of 4.26 percent attained on July 3, 2014.
Short-term U.K. bonds surged on bets a breakup vote will force the Bank of England to retain the low interest rates for longer. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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