Sterling nosedives to 31-year low

The pound plunged yesterday with UK stocks after the nation voted for a Brexit.

Sterling slid by the most on record against the dollar, reaching its weakest level since 1985, as the nation opted to quit the European Union after more than four decades.

The 8.4% plunge by yesterday evening was its worst day on record, exceeding the 4.1% drop on 1992’s Black Wednesday, when the pound was forced out of Europe’s exchange-rate mechanism — the previous biggest daily drop.

Sterling slumped to its weakest level in more than two years versus the euro, and a gauge of anticipated swings versus the dollar over the next month surged to a record.

Sterling earlier reached $1.3229 earlier, the lowest since 1985. 

The UK currency weakened 6.4% to 81.72 pence per euro, for the biggest decline on record.

The pound swung in a wider range versus the dollar yesterday than it did through all of last year.

Investec Ireland chief economist Philip O’Sullivan said he expects sterling to weaken further in the coming months but doesn’t see the euro and sterling reaching parity as some commentators suggested prior to the referendum.

“We thought sterling would go to 83p in the wake of a Brexit decision. It did actually briefly go through that level this morning and it has strengthened a little bit. It’s 81.7p at the moment.

“It’s obviously a very negative development for a lot of Irish companies, roughly 40% to 45% of Irish indigenous firms’ exports go the UK so obviously this is something that is very severe and very unwelcome headwind for a lot of Irish companies.

“The risk is that sterling will go slightly weaker over the next couple of weeks possibly to 83p and then later on in the year the expectation is that by the end of this year sterling will be 85p but it’s not going to be a linear movement. 

“There’s going to be a lot of headlines out with the G7 making comments, Central Banks will be making comments, you’re going to have a lot of updates throughout the year,” Mr O’Sullivan said.

“There are certain days you never forget and this will be one of them,” said David Bloom, head of global currency strategy at HSBC Holdings. “Everyone is all over the place, it’s been a roller-coaster.”

The pound has fluctuated vigorously since the start of the campaign in February, acting as a barometer for sentiment and reflecting the side of the debate in the lead.

Bloomberg with additional reporting from Irish Examiner staff

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