British pound slumps to 31-year low after Brexit timetable announced

PUBLISHED : Tuesday, 04 October, 2016, 4:14pm
UPDATED : Tuesday, 04 October, 2016, 10:20pm

The pound fell to its lowest level in 31 years on Tuesday afternoon following British Prime Minister Theresa May’s announcement that the process of withdrawal from the European Union would begin by April.

The pound dropped to US$1.2759, the lowest since June 1985. The currency has weakened for six months in a row.

Mrs May told the Conservative Party conference on Sunday that the UK would start formal Brexit negotiations by the end of March next year, meaning a full exit from the bloc is likely by summer 2019.

“I think the British pound will fluctuate at a level of US$1.3 until next March,” said Ben Kwong Man-bun, a director of KGI Asia. “I do not expect further big drops for the pound in the coming months.

“I think the pound will find its new direction in March next year when the Brexit process is expected to start.”

China’s yuan failed to find any traction on its second day as a global reserve currency, trading slightly weaker on Tuesday afternoon as mainland investors enjoy a week-long holiday.

On October 1, the International Monetary Fund conferred what is seen by many as a stamp of recognition on China’s status as a key global financial system player by adding the yuan as its fifth Special Drawing Rights (SDR) currency.

Offshore yuan in Hong Kong (CNH) traded at 6.6834 to the US dollar at 2.05 pm, 0.09 per cent, or 63 points weaker than on Monday.

Trading of onshore yuan in Shanghai (CNY) is on hold for the whole of this week, having closed at 6.6745 last Friday.

In other currency trading, the euro weakened 0.28 per cent to US$1.1179, while the yen traded lower at 102.35 against the greenback after sliding for six days in a row.