Sterling carved out a fresh 31-year trough on Wednesday, while the safe-haven yen soared on heightening fears of the broader impact of Britain’s vote last month to exit the European Union.
The pound slid as far as $1.2798, breaking through the previous low of $1.3000 set overnight. It was last down 1.2 per cent at $1.2867. The euro jumped as high as 86.26 pence, its highest since August 2013, and was last up 0.9 per cent at 85.76 pence.
Against the resurgent Japanese currency, sterling fell as low as 128.81 yen, its lowest since November 2012. It was last down 2.2 per cent at 129.61.
The dollar dropped as low as 100.58 yen, pulling back from Friday’s post-Brexit high of 103.40. It was last down 1 per cent at 100.72 yen, holding above the June 24 trough of 99.000 touched in the wake of the UK vote when nerves were still raw.
“It’s back to double digits for dollar/yen? I think this is a pretty precarious level, and if we break through 100, we should start to hear some rumblings from officials,” said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
“I’m sure there are a lot of safe-haven flows into the yen, obviously against sterling, but other crosses like euro-yen, so it's not just a straight yen valuation against any one currency,” Wakabayashi said. “It's a difficult market for traders, and I’m sure it’s a difficult market for central bankers and policymakers as well.”
The euro retreated below 112.00 yen for the first time in over a week, to a session low of 111.03, though it, too, held above its post-Brexit June 24 low of 109.30. It was last down 1.3 per cent at 111.26 yen.
US Treasury yields
Fears of financial contagion spooked investors and sent them scurrying into the safety of government bonds, which helped push the benchmark 10-year Treasury yield to a fresh record low of 1.345 per cent in Asian trading on Wednesday. The benchmark 10-year Japanese government bond also plumbed a fresh record low of minus 0.275 per cent.
Rattling markets, three British commercial property funds worth about £10 billion suspended trading this week after the Brexit vote sent asset prices into a tailspin.
Also adding to a growing sense of market instability, shares in Italy’s banks, which are suffocating under a pile of non-performing loans, plunged on Tuesday.
“The market will focus on risks building in Europe. Expect headlines surrounding Brexit and Italian banks to drive volatility,” analysts at ANZ wrote in a note to clients.
The Australian dollar dropped, though it fared relatively better than some counterparts despite the renewed risk aversion, thanks in part to still attractive Australian bond yields. The Aussie fell 0.6 per cent to $0.7412, having been as high as $0.7545 in the previous session.
The Reserve Bank of Australia had on Tuesday left interest rates unchanged as expected and again disappointed some doves by not providing a clear easing bias.