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Sterling falls to new low against the dollar in Asia trade | Sterling falls to new low against the dollar in Asia trade |
(35 minutes later) | |
The pound has hit a new low in Asian trading as concerns about the UK's vote to leave the European Union continue to weigh on investor confidence. | The pound has hit a new low in Asian trading as concerns about the UK's vote to leave the European Union continue to weigh on investor confidence. |
It touched $1.2798 against the dollar on Wednesday, a fresh 31-year low. | It touched $1.2798 against the dollar on Wednesday, a fresh 31-year low. |
The drop came as US government bond yields fell to record lows as investors rushed for perceived safe havens. | The drop came as US government bond yields fell to record lows as investors rushed for perceived safe havens. |
The moves follow decisions by fund managers, including Standard Life and Aviva, to stop investors withdrawing money from their UK property funds. | The moves follow decisions by fund managers, including Standard Life and Aviva, to stop investors withdrawing money from their UK property funds. |
They said the high levels of uncertainty caused by the referendum had led to investors rushing to pull their money out. | They said the high levels of uncertainty caused by the referendum had led to investors rushing to pull their money out. |
Brexit risks 'emerging' | |
Yields on Australian and Japanese government bonds also hit record lows as the flight to so-called safe havens, or investments that are perceived as less risky, continues. | Yields on Australian and Japanese government bonds also hit record lows as the flight to so-called safe havens, or investments that are perceived as less risky, continues. |
Financial markets were shaken by the Brexit vote two weeks ago, with trillions of dollars lost from global equity markets and currencies like the pound suffered steep falls. | |
They have since recovered some ground on speculation central banks will ramp up stimulus measures to stabilise the markets. | |
However, investors now face more uncertainty after UK Prime Minister David Cameron, who campaigned for the UK to stay in the EU announced his resignation, leading to a sharply contested ballot to replace him as leader of the Conservative Party and PM. | |
There has been a rush to buy up certain government debt, which saw the yields on the 10-year US, UK and German bonds at or near their lowest on record. | |
Jitters also sent yields on almost all bonds issued by the Swiss government negative, meaning the return is less than zero. | Jitters also sent yields on almost all bonds issued by the Swiss government negative, meaning the return is less than zero. |
High demand tends to push up bond prices, and when the price of bonds rises their yield falls. | High demand tends to push up bond prices, and when the price of bonds rises their yield falls. |
Investor confidence was undermined by the Bank of England's warning on Tuesday that there was evidence that some of the risks it identified related to Brexit were already emerging. | |
Disappointing data on the UK services sector and a decline in US factory orders also weighed. | Disappointing data on the UK services sector and a decline in US factory orders also weighed. |
Asian markets | |
Meanwhile, Asian stock markets are falling due to the renewed Brexit concerns. | |
Japan's benchmark Nikkei 225 has dropped nearly 3% and the broader Topix has shed 2.6% as the yen, another safe haven investment, strengthened against the US dollar. | |
South Korea's Kospi fell 2% and Australia's S&P/ASX 200 index is down 1.4%. | |
Hong Kong's Hang Seng fell 1.9% and the Shanghai Composite is 0.4% lower. | |
Indonesia, India, Singapore, Malaysia and the Philippines stock markets are closed for holidays. | Indonesia, India, Singapore, Malaysia and the Philippines stock markets are closed for holidays. |