NEW YORK (Reuters) – The sterling tumbled on Thursday after British ministers resigned in protest against a draft Brexit agreement, rekindling fears of a chaotic departure for Britain from the European Union in 4-1/2 months.
U.S. dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto, Ontario, Canada June 13, 2018. REUTERS/Chris Helgren
Traders flocked into the perceived safety of the dollar and yen as the pound swung wildly this week over Brexit. On Thursday, British Prime Minister Theresa May said she won the backing of her senior ministers for a draft divorce deal, but many in her government are unconvinced and on Friday her Brexit minister Dominic Raab, and other ministers, resigned.
“Heightened political uncertainty in the UK kept the pound on volatile ground,” Western Union Business Solutions analysts wrote in a research note. “Sterling was spellbound, alternating between gains and losses, after Britain’s Brexit minister resigned.”
Raab’s resignation left May battling for survival as well as trying to win over her Conservative Party to support the EU withdrawal agreement.
At 11:02 a.m. (1602 GMT), sterling GBP=D3 was down 1.65 percent at $1.2768.
Against the euro, it EURGBP=D3 was 1.71 lower at 88.57 pence.
Reports out of Italy that Prime Minister Giuseppe Conte was looking to work with the EU over his government’s 2019 budget, which has been rejected by Brussels, to avert massive fines had earlier helped support Italian government bond markets and the euro.
The single currency held steady versus the greenback EUR=EBS at $1.131, but it fell 0.19 percent to 128.235 yen.
“The dollar is benefiting from the sterling crash,” said Manuel Oliveri, FX strategist at Credit Agricole.
An index that tracks the greenback against six major currencies .DXY was up 0.3 percent at 97.098. It touched a 16-month high of 97.693 on Monday.
The dollar was down 0.21 percent at 113.38 yen.
Analysts said the dollar’s gains on the back of the sterling slump were contained after some cautious comments about the economic outlook from Federal Reserve chairman Jerome Powell overnight.
Additional reporting by Tommy Wilkes, Saikat Chatterjee in LONDON; Editing by David Stamp and Raissa Kasolowsky