Pound extends drop against Singapore dollar as concern over no-deal Brexit grows

The pound also slumped for a second day against the Singapore dollar, dropping 0.7 per cent to $1.7770.
The pound also slumped for a second day against the Singapore dollar, dropping 0.7 per cent to $1.7770.PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - The pound extended its slide against all of its major peers on Wednesday (Dec 18) as renewed concern the UK may be headed for a no-deal Brexit spurred traders to dump the currency.

The British unit also slumped for a second day against the Singapore dollar, dropping 0.7 per cent to $1.7770 as at 1:09pm. This brings its loss since Monday's trading close at $1.8114 to 1.9 per cent.

With that, the pound has more than erased all the gains it made against the Singdollar after the Conservative Party won Thursday's general election. The pound last closed at $1.7913 before the UK elections results were out.

On Tuesday, the pound tumbled as much 1.7 per cent against the US dollar following Prime Minister Boris Johnson's plans to set a Brexit deadline of December 2020, with or without a trade deal with the European Union.

On Wednesday, it slipped 0.2 per cent to US$1.3102 as of 12:59pm in Tokyo after dropping to US$1.3073, the weakest level since Dec 12.

Johnson's plans "would leave the UK and EU less than one year to negotiate and enact a free-trade agreement, something most political commentators regard as almost impossible", said Jeffrey Halley, senior market analyst for Asia Pacific at Oanda Corp. "The US$1.30 region is a huge pivot point now" for sterling traders, he said.

The pound slipped 0.2 per cent to US$1.3102 as of 12:59pm in Tokyo after dropping to US$1.3073, the weakest level since Dec 12.

Traders are bracing for more potential upheaval as Johnson prepares to put the divorce part of his Brexit deal to a vote in Parliament as soon as Friday. The British prime minister wants to deliver his election promise to finalise a new free-trade agreement with the EU before the bridging period maintaining the status quo runs out on Dec 31 next year.

One-year implied volatility in the pound-dollar pair climbed for a second day, after jumping the most in a year on Tuesday.

 
 

"The market is coming to the realisation that Boris Johnson actually means what he says - Brexit will happen no matter what," said Mingze Wu, a foreign-exchange trader at INTL FCStone in Singapore. Worsening developments could push the pound down to as low as US$1.20, he said.

With additional information from The Straits Times