The British pound collapsed to a 31-year low and there was pandemonium on currency, equity and oil markets yesterday as Britain voted to leave the EU, fueling a wave of global uncertainty.
Sterling crashed 10 percent to US$1.3229 at one point, its weakest level since 1985, while the greenback itself slumped below ¥100 for the first time in two-and-a-half years as traders fled to safety.
Global markets suffered one of their worst days since the 2008 financial crisis after final results confirmed one of the EU’s big three economies would leave the bloc after four decades.
Photo: Reuters
Fears are also growing that other EU members will push for referendums, posing the biggest threat to the future of grouping since its inception about 60 years ago.
The pound had earlier topped US$1.50 following predictions the “Remain” group would win, but as the “Brexit” camp posted early victories around the country, traders stampeded to put in sell orders. In Asian afternoon trade it was at US$1.369.
“Leave’s victory has delivered one of the biggest market shocks of all time,” said Joe Rundle, head of trading at ETX Capital. “The reverberations of the vote will be felt around the world.”
“The extent of the damage on asset prices is hard to gauge, but it’s likely to be bigger than anything since Lehmans at the very least,” he added, referring to the Wall Street bank whose collapsed precipitated the global financial crisis.
The US dollar slumped briefly to ¥99.02, the first time it has gone below ¥100 since November 2013, before edging back up above ¥102. The Japanese unit is considered a safe bet in times of uncertainty and turmoil.
The Bank of Japan yesterday said it was ready to work with other central banks to pump cash into financial markets to combat wild swings, while the Bank of England said it would take “all necessary steps” to avert a full-blown crisis.
Earlier, Japanese Minister of Finance Taro Aso vowed a “firm response” to volatility if necessary.
A flight to safety also saw higher-yielding and emerging market currencies slump, with the Australian dollar down 3.4 percent, South Korea’s won diving 2.4 percent and the Indonesian rupiah shedding 1.7 percent. Malaysia’s ringgit was down 2.7 percent, one of its worst days since 1998.
There were also heavy losses for India’s rupee, the Canadian dollar and the Singaporean dollar.
Gold, another safe investment asset, surged 6 percent to sit at a two-year high.
As the shock results rolled in, equity markets went into meltdown, wiping hundreds of billions of dollars off shares.
Tokyo plunged about 8 percent, Sydney shed 3.2 percent and Seoul was 3.1 percent off. Mumbai lost 3.8 percent and Shanghai sank 1.3 percent, while Taipei, Wellington, Manila and Jakarta all saw sharp losses.
Hong Kong tumbled 4.4 percent — having lost more than 5 percent at one point — in the afternoon with British banking giants HSBC Holdings PLC and Standard Chartered PLC both losing about 9 percent. In Pakistan, which relies on exports the Britain, the stock exchanged dived more than 3 percent.
“It’s scary, and I’ve never seen anything like it,” James Butterfill, head of research and investments at ETF Securities, said in London.
“A lot of people were caught out, and many investors will lose a lot of money,” he told Bloomberg News.
The prospect of a severe hit to the global economy also hammered oil prices, with both main contracts slumping more than 6 percent.
“We are seeing oil swept up in the general market nervousness to the vote,” Sydney-based CMC Markets chief analyst Ric Spooner said.
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