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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 |
(about 3 hours 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 31-year low, before recovering slightly to $1.2929. | |
The pound has now fallen about 14% against the dollar since hitting $1.50 ahead of the referendum result. | |
US government bond yields also fell to record lows as investors rushed to put money in perceived havens. | |
The falls follow decisions by fund managers, including Standard Life and Aviva, to stop investors withdrawing money from their UK property funds. | The falls 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. |
Investor confidence was further undermined by the Bank of England's warning on Tuesday that there was evidence some of the risks it identified related to Brexit were already emerging. | Investor confidence was further undermined by the Bank of England's warning on Tuesday that there was evidence 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 fuelled pessimism. | Disappointing data on the UK services sector and a decline in US factory orders also fuelled pessimism. |
'More uncertainty' | 'More uncertainty' |
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. | 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. | 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. | 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. |
As a result, there has been a rush to buy up government debt, another haven investment, from certain countries. | |
This includes 10-year US, UK, Swiss and German bonds which have seen their yields at or near their lowest on record. | This includes 10-year US, UK, Swiss and German bonds which have seen their yields at or near their lowest on record. |
Yields on Australian and Japanese government bonds have also hit record lows. | Yields on Australian and Japanese government bonds have also hit record lows. |
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. |
Asian markets | Asian markets |
The renewed Brexit concerns hit Asian stock markets. Japan's benchmark Nikkei 225 shares index closed 1.85% lower at 15,378.99, but it had been more than 3% lower at one point during the day. | |
The broader Topix index shed 1.8% to 1,234.20 as the yen, another haven investment, strengthened against the US dollar. | |
South Korea's Kospi index fell 1.9% to close at 1,953.12 and its currency the won extended losses to a one-week low. | |
Australia's S&P/ASX 200 shares index lost 0.6% to shut at 5,197.50. | |
Hong Kong's Hang Seng index was down 1.7% at 20,404.47, although the Shanghai Composite edged up 0.1% to 3,009.54. | |
Stock markets in Indonesia, India, Singapore, Malaysia and the Philippines are closed for holidays. |