Pound falls sharply against Singdollar after report of new Scottish referendum

A counting machine tallies British pound notes.
A counting machine tallies British pound notes.PHOTO: AFP

SINGAPORE (BLOOMBERG) - The pound weakened against all its major peers after a report said UK Prime Minister Theresa May's team was preparing for Scotland to potentially call for an independence referendum in March.

The pound dropped 0.4 per cent to US$1.2412 after sliding to 1.2392, lowest level since Feb 17.

Against the Singapore dollar, it tumbled 0.8 per cent to S$1.7463 as of 12:17pm from its last close of S$1.7611.

The Times of London said May could agree to a new Scottish vote, but on condition it's held after the UK leaves the European Union, citing unidentified government sources.

Leveraged and macro funds hit bids in response to the report, an Asia-based foreign-exchange trader said.

Scotland voted 55 per cent to 45 per cent in September 2014 to stay inside the UK's union.

"If the market does seriously think there can be another independence referendum much sooner than that, then remembering how hard the pound fell in early September 2014 just in front of the prior referendum, then the memory of that makes sterling a fairly easy sell here," said Ray Attrill, global co-head of foreign exchange at National Australia Bank Ltd. in Sydney. "I suspect there's been a bit of an overreaction here."

"It seems unlikely that Westminster would agree to another referendum any time soon," says Sean Callow, senior strategist at Westpac Banking Corp. in Sydney. "I wouldn't be surprised to see GBP/USD back above 1.2450 in London trade unless there has been a genuine change in the timetable for another Scottish vote."

With additional information from The Straits Times