Pound dives after London Mayor backs 'Brexit' plan

The British pound plunged against the Singapore dollar on Monday.
The British pound plunged against the Singapore dollar on Monday. PHOTO: EPA

Sterling falls to 2½-year low against S'pore dollar as popular Tory MP backs UK's EU exit

The British pound plunged against the Singapore dollar yesterday after London Mayor Boris Johnson threw his considerable political weight behind the "Brexit" campaign.

Sterling was trading at 1.9759 to the Singdollar at 8.30pm Singapore time - a fall of 5.2 per cent since the start of the year and its lowest point since August 2013.

The pound also sank against the greenback and is now down 4.3 per cent since the start of the year.

The catalyst for yesterday's falls was the decision by Mr Johnson, who is also a Conservative Party MP, to join the campaign backing a British exit from the European Union.

Mr Johnson's huge popularity and political clout will give the "out" campaign a significant boost leading up to the June 23 referendum.

The prospect of a "Brexit" has raised fears in financial markets and the wider business community, sparking yesterday's run on the pound.

"Sterling has come under heavy selling pressure as the debate on whether to remain in or leave the EU appears to be increasingly polarised. Some senior Cabinet ministers, including London Mayor Boris Johnson and Justice Secretary Michael Gove and up to 150 of 330 Conservative MPs, are reported to be in favour of leaving," ANZ head of global economics Brian Martin said.

Volatility in the pound will likely rise ahead of the referendum, said Mr Heng Koon How, senior FX strategist at Credit Suisse Private Banking Asia Pacific.

"In the weeks leading up to the vote, volatility will likely rise as the 'stay' and 'leave' camps seek to influence public opinion. Cameron is off to a difficult start as several mainstream MPs, including Justice Secretary Michael Gove, are to join the Brexit campaign," Mr Heng said, referring to British Prime Minister David Cameron.

"While we expect the UK will eventually vote to stay in the EU, the pound is likely to bear the brunt of negative developments. In addition, the European Central Bank may loosen monetary policy further when it meets in mid-March, which would dampen the chances of a rebound in the pound against the US dollar.

"In other words, now is not the time to pick the bottom in the pound."

Singaporean Melissa Koenig, 37, who is working as an insurance manager in London, said the weaker pound will affect her bill payments back in Singapore.

"I still (pay) for insurance and my study loan, and give an allowance to my parents. So the weaker pound means these cost more on a relative basis," she said. "Other than that, overseas holidays will also cost more.

"It might not deter me from smaller-ticket items. But if it drops further, I would reconsider travel plans, especially on longer, more expensive trips."

SEE WORLD 

London Mayor Boris Johnson to campaign for Britain's EU exit

A version of this article appeared in the print edition of The Straits Times on February 23, 2016, with the headline 'Pound dives after London Mayor backs 'Brexit' plan'. Print Edition | Subscribe