Voting has literally stunned the world and rocked global markets in the aftermath of the Brexit vote to “Leave” the EU.
Sterling hits 31-year low on Brexit, central banks hint at intervention
Sterling sank 10 percent in value to its weakest since before the 1985 Plaza Accord on Friday after Britain voted to leave the European Union, triggering a global rush of capital into the traditional security of the yen and the Swiss franc.
Alongside the biggest moves in the pound in living memory the euro, which is expected to struggle given worries about the impact of a “Brexit” on the euro zone economy, also dropped sharply against the dollar.
The franc surged to its strongest in almost a year against the euro, and the yen to its highest in more than two years. The Swiss National Bank became the first major central bank to step in to drive down the value of the franc, while speculation that the Bank of Japan could also act limited the yen’s advance.
Japanese Finance Minister Taro Aso said Prime Minister Shinzo Abe had instructed him to cooperate with the Bank of Japan and closely consult with Group of Seven partners in responding to market moves. Aso added that excess volatility in currency markets was undesirable and he would respond to market moves when necessary.
A German finance ministry spokesman said finance ministers and central bank chiefs from the G7 economic powers held a teleconference on Friday as Britain’s decision to leave the EU created ripples in the currency market and beyond.
The pound fell more than 10 percent to $1.3228 GBP=D4, its lowest since before the world’s major economies signed a deal to weaken the dollar in September 1985.
related:
El-Erian – Seven Lessons From the U.K.’s Departure
