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| Pound Drops Sharply in Asian Trading Amid ‘Brexit’ Fears | Pound Drops Sharply in Asian Trading Amid ‘Brexit’ Fears |
| (about 3 hours later) | |
| LONDON — The British pound plunged suddenly in the early hours of trading in Asia 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. | LONDON — The British pound plunged suddenly in the early hours of trading in Asia 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 by the evening in London. While a fall of that degree is notable for a major currency, it paled in comparison to the pound’s unexpected drop of more than 6 percent over a span of minutes in the thinly traded currency markets early in the Asian trading day. | |
| A sudden drop like the one on Friday is often called a flash crash, and it is sometimes caused by 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 the one on Friday is often called a flash crash, and it is sometimes caused by 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. |
| The Bank of England said later on Friday that Mark J. Carney, the central bank’s governor, had asked the Bank for International Settlements’ Markets Committee to look into “the events surrounding the flash crash in sterling during Asian trade.” | |
| The markets committee consists of senior officials responsible for market operations at 21 central banks worldwide. The central bank itself, however, may have little room to act, because foreign currency trading is lightly regulated. | |
| But over all, analysts 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. | “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,” he added, “fundamentals have certainly been driving sterling lower.” | “Nonetheless,” he added, “fundamentals have certainly been driving sterling lower.” |
| The pound, when compared with the dollar, is off nearly 17 percent since the referendum on June 23 and is trading at its lowest levels since the mid-1980s. | The pound, when compared with the dollar, is off nearly 17 percent since the referendum on June 23 and is trading at its lowest levels since the mid-1980s. |
| “Sterling has been under persistent pressure for a month,” said Alvin T. Tan of Société Générale, the French bank. | “Sterling has been under persistent pressure for a month,” said Alvin T. Tan of Société Générale, the French bank. |
| The pound has been under significant pressure this week after Theresa May, the British prime minister, said on Sunday at the start of the governing Conservative Party’s annual convention that Britain would begin formal negotiations to exit the bloc by the end of March. | The pound has been under significant pressure this week after Theresa May, the British prime minister, said on Sunday at the start of the governing Conservative Party’s annual convention that Britain would begin formal negotiations to exit the bloc by the end of March. |
| Mrs. May and other Conservative leaders have signaled that Britain could be headed for a so-called hard Brexit, with few concessions on trade and migration. | Mrs. May and other Conservative leaders have signaled that Britain could be headed for a so-called hard Brexit, with few concessions on trade and migration. |
| A top priority in negotiations over the withdrawal will be Britain’s power to control immigration and skirt European Union rules that allow people to move and settle across national frontiers. That stance has irked some business leaders who fear a loss of tariff-free access to Europe’s single market. | A top priority in negotiations over the withdrawal will be Britain’s power to control immigration and skirt European Union rules that allow people to move and settle across national frontiers. That stance has irked some business leaders who fear a loss of tariff-free access to Europe’s single market. |
| Investors have grown increasingly nervous. | Investors have grown increasingly nervous. |
| “Many investors, it seems, were awaiting clarity from the government about what type of Brexit it would prioritize, and many presumably were hoping for a softer Brexit that minimized the longer-term economic damage,” Paul Meggyesi, a JPMorgan Chase research analyst, said in a note to clients on Friday. | |
| “But such hopes were dashed at the Conservative Party conference last weekend, and it’s not unreasonable to attribute the subsequent 4 percent drop in the pound to some of these investors starting to reassess their positions,” he added. | “But such hopes were dashed at the Conservative Party conference last weekend, and it’s not unreasonable to attribute the subsequent 4 percent drop in the pound to some of these investors starting to reassess their positions,” he added. |
| On Friday, experts also cited a report by The Financial Times on a speech given by President François Hollande of France on Thursday evening, in which he said that European Union officials should take a tough negotiating stance with Britain. | On Friday, experts also cited a report by The Financial Times on a speech given by President François Hollande of France on Thursday evening, in which he said that European Union officials should take a tough negotiating stance with Britain. |
| Analysts also identified other factors. 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. | Analysts also identified other factors. 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 moves being exaggerated — included caution before a monthly report on jobs growth in the United States that was released later on Friday. | Other reasons for thin trading — which often leads to moves being exaggerated — included caution before a monthly report on jobs growth in the United States that was released later on Friday. |