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| Pound Drops Sharply in Asian Trading Amid Brexit Fears | |
| (about 1 hour later) | |
| HONG KONG — The British pound plunged suddenly in early trading on Friday before just as quickly making back most of its losses, puzzling currency trading experts but underscoring investor skittishness over Britain’s prospects as it moves to break away from the European Union. | HONG KONG — The British pound plunged suddenly in early trading on Friday before just as quickly making back most of its losses, puzzling currency trading experts but underscoring investor skittishness over Britain’s prospects as it moves to break away from the European Union. |
| The pound remained about 1.2 percent weaker compared with the dollar before the beginning of European trading on Friday. While a fall of that degree is notable for a currency, it paled in comparison to the pound’s unexpected drop of more than 6 percent several hours before, during Asian trading, over a span of minutes. | The pound remained about 1.2 percent weaker compared with the dollar before the beginning of European trading on Friday. While a fall of that degree is notable for a currency, it paled in comparison to the pound’s unexpected drop of more than 6 percent several hours before, during Asian trading, over a span of minutes. |
| A sudden drop like that is often called a flash crash, and is sometimes caused by computer-driven automated trades or a simple misplaced keystroke — a fat-finger error, as it is known on trading floors. In the case of the drop in Asia for the pound, also known as sterling, experts said they were hard-pressed to identify a single cause. | A sudden drop like that is often called a flash crash, and is sometimes caused by computer-driven automated trades or a simple misplaced keystroke — a fat-finger error, as it is known on trading floors. In the case of the drop in Asia for the pound, also known as sterling, experts said they were hard-pressed to identify a single cause. |
| But over all, they pointed to a general area of unease: Britain’s vote in a referendum in June to leave the European Union, a move known as Brexit. | But over all, they pointed to a general area of unease: Britain’s vote in a referendum in June to leave the European Union, a move known as Brexit. |
| “The depth of the collapse and speed of the recovery certainly argue for algorithmic trading being the cause, perhaps exacerbated by trader error,” said Daniel Morris, senior investment strategist at BNP Paribas Investment Partners. “Nonetheless, fundamentals have certainly been driving sterling lower.” | “The depth of the collapse and speed of the recovery certainly argue for algorithmic trading being the cause, perhaps exacerbated by trader error,” said Daniel Morris, senior investment strategist at BNP Paribas Investment Partners. “Nonetheless, fundamentals have certainly been driving sterling lower.” |
| As Britain’s new leaders have pledged to move forward with the process, investors have grown increasingly nervous. | As Britain’s new leaders have pledged to move forward with the process, investors have grown increasingly nervous. |
| “Sterling has been under persistent pressure for a month,” said Alvin T. Tan at Société Générale, the French bank. | “Sterling has been under persistent pressure for a month,” said Alvin T. Tan at Société Générale, the French bank. |
| He cited the pledge by Britain’s new prime minister, Theresa May, to begin the process of leaving the European Union. That could lead to what some call a “hard Brexit,” or a swift severing of ties that could leave uncertainty in how Britain will trade with Europe. | He cited the pledge by Britain’s new prime minister, Theresa May, to begin the process of leaving the European Union. That could lead to what some call a “hard Brexit,” or a swift severing of ties that could leave uncertainty in how Britain will trade with Europe. |
| Experts also cited an article in The Financial Times that quoted President François Hollande of France telling European Union officials that they should take a tough negotiating stance with Britain. | Experts also cited an article in The Financial Times that quoted President François Hollande of France telling European Union officials that they should take a tough negotiating stance with Britain. |
| Investors have expressed their skittishness by selling investments denominated in pounds, driving the currency down 16 percent versus the dollar so far this year. | Investors have expressed their skittishness by selling investments denominated in pounds, driving the currency down 16 percent versus the dollar so far this year. |
| Experts identified other exacerbating reasons. Trading in Asia has been lighter than usual, as China nears the end of a holiday week and Hong Kong begins its own holiday. Even under normal circumstances, trading in currencies is often lighter in Asia than in Europe or the United States. | Experts identified other exacerbating reasons. Trading in Asia has been lighter than usual, as China nears the end of a holiday week and Hong Kong begins its own holiday. Even under normal circumstances, trading in currencies is often lighter in Asia than in Europe or the United States. |
| Other reasons for thin trading — which often leads to exaggerating moves — include caution before a monthly report on jobs growth in the United States expected later on Friday. | Other reasons for thin trading — which often leads to exaggerating moves — include caution before a monthly report on jobs growth in the United States expected later on Friday. |