Sterling plunged on Friday, driving the US dollar up, after fears rose that Britain would leave the EU without a trade deal.
British Prime Minister Theresa May on Friday said that the EU must supply an alternative Brexit proposal, adding that talks had reached an impasse after the bloc’s leaders had rejected her plans without fully explaining why.
The pound fell 1.44 percent on Friday, posting its biggest daily loss since June last year.
“Sterling bears are out in full force. They’ve pushed the pound quite aggressively down this morning,” said Dean Popplewell, chief currency strategist at Oanda Corp in Toronto. “It looks like they want to push things further.”
The pound’s move strengthened the US dollar, which rebounded from early lows, but it still posted its biggest weekly drop since February as stronger equity markets and rising bond yields fueled a rush to buy riskier assets.
The US dollar index rose 0.34 percent Friday to 94.22, down 0.7 percent for the week.
“On the back of [the pound’s fall], it’s interesting the dollar got a bit of a bid as well. The trade woes in the last 48 hours took a bit of a back seat and it did allow some of the risk takers to set their sights on some of the other G7 currencies,” Popplewell said.
With trade war concerns receding and emerging-market central banks led by Turkey taking measures to stabilize their currencies, investors pushed the euro just past the US$1.18 line for the first time in more than three months during the European session.
However, the US dollar’s bounce pulled the single currency back into the red, to US$1.174. Still, the euro rose 0.9 percent against the greenback from last week.
The safe-haven bid into the US dollar has been bolstered by strong US economic data, boosting the value of the currency as trade war between Washington and Beijing escalates.
Other safe-haven assets have also suffered, including the Japanese yen, against which the US dollar has strengthened this week.
On Friday, the yen traded at ¥112.62 per US$1, the highest price since July and up 0.5 percent for the week.
The market will be focused on the US Federal Reserve’s policymaking committee meeting next week, at which a hike in interest rates is expected by 93.8 percent of traders, according to CME Group’s FedWatch tool.
With the likelihood of a Fed hike almost fully priced in by the market, analysts at TD Securities suggest that might yield an “asymmetric response in the FX markets, where the dollar weakens more on a dovish take than rallies on a hawkish one.”
In Taipei, the New Taiwan dollar on Friday rose against the greenback, gaining NT$0.079 to close at NT$30.716. The NT dollar rose 0.1 percent against the US dollar from last week’s NT$30.760.
Additional reporting by staff writer, with CNA
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