The pound maintained its downtrend in Asian trading today as the British currency comes under renewed pressure on fears of capital outflows following the UK’s vote to leave the EU. The concerns intensified yesterday after several UK property funds suspended trading of their real estate funds due to large withdrawals. The UK property market is expected to be one of the biggest casualties of Brexit as it relies heavily on foreign investment.
Bank of England Governor Mark Carney added to sterling’s woes yesterday, saying that the currency’s adjustment has “moved in the direction that is necessary”. The pound hit a fresh 31-year low of 1.2794 dollars in Asian trading on Wednesday but rebounded to around 1.2985 dollars in late session. It also fell against the euro as the single currency rose to a near three-year high of 0.8628 pounds.
The risk-off trading hit commodity currencies as the New Zealand dollar fell by 0.7% to 0.71 versus the US dollar, but the Australian dollar posted a sharp rebound to stand at 0.7460 in late Asian session.
The Canadian dollar also rebounded as crude oil prices firmed slightly after yesterday’s heavy losses. The greenback was hovering around the 1.30 level against the loonie in late Asian trading.
The Chinese yuan however, continued to struggle, touching another 5½-year low against the dollar on Wednesday. The People’s Bank of China appeared to be setting the midpoint according to the market moves as it fixed a weaker midpoint of 6.6857 per dollar today.
The euro ignored weaker-than-expected German factory orders to rebound from an earlier low of 1.1035 dollars to around 1.1065 dollars in late Asian session. German factory orders were flat in May, missing estimates that they would rise by 1% month-on-month.
The dollar also attempted to bounce off its lows after hitting a 1½-week low of 100.57 yen in early Asian trading. The greenback managed to reclaim the 101 level in late Asian session but found little support from slightly more hawkish-than-expected comments from New York Fed President William Dudley. Speaking in New York on Tuesday, Dudley did not appear too concerned from the impact of Brexit, saying the Fed needs to be “a little more patient”.
The yen was one of the big benefactors of the deteriorating risk sentiment in the markets today as the pound hit 128.75 yen –the lowest since November 2012 and the euro dropped back below 112 yen. Meanwhile, gold prices climbed to the highest since March 2014, reaching $1371.40 an ounce, while government bond yields continued to decline to record lows.
Looking ahead to the rest of the day, upcoming speeches by the Fed’s Dudley and Tarullo will be eyed along with the Fed’s minutes of the June FOMC meeting, which will be published later today. In terms of data, US trade figures and the ISM non-manufacturing composite will be the main numbers to watch.
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