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 The pound fell nearly 2 percent at one point to a one-month low of
$1.4133, putting it on track for its biggest daily percentage loss
since May 2010, while the euro rose 1.1 percent to 78.17 pence.
London Mayor Boris Johnson, a political heavyweight in the ruling
Conservative Party, said on Sunday he would support the campaign to
leave the EU in a June 23 referendum, putting him at odds with Prime
Minister David Cameron.
Cameron, who struck a deal to reform Britain's relations with the EU
last week, was due to make his case for staying in the EU in
parliament later on Monday.
With dealers expecting choppy trading in the run-up to the vote, the
cost of hedging against weakness in sterling hit its highest in more
than four years.
"The 'Out' camp were struggling to get a figurehead who was popular
and Boris has given them that boost," said Alvin Tan, a strategist
with French bank Societe Generale in London.
"I think there is genuine worry that Britain might vote to leave and
the uncertainty is going to rise into the referendum."
British shares, however, rose in line with other European bourses.
London's resources-heavy FTSE 100 index was up 1.2 percent,
though a 2.9 percent fall in HSBC after the bank's 2015 profit fell
short of expectations, took its toll. HSBC earlier fell close to 5
percent.
"Brexit is not a story for equities at the moment but that might
change ... For sure the probability of Brexit has increased after
the positioning of Boris Johnson," said Jurgen Michels, chief
economist at BayernLB in Munich.
Ten-year yields on UK government debt rose 2 basis points to 1.44
percent. German 10-year yields, the euro zone benchmark, were flat
at 0.2 percent.
European shares extended last week's gains even after surveys of
economic activity painted a mixed picture. The pan-European
FTSEurofirst 300 index gained 1.2 percent, led by miners.
Private sector business activity in the euro zone increased at its
weakest pace in more than a year this month, according to Markit's
composite flash Purchasing Managers' Index.
U.S. stock index futures signaled Wall Street would open about 1.2
percent higher.
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MSCI's broadest index of Asia-Pacific shares outside Japan gained 1
percent, having rebounded more than 4 percent last week.
China's benchmark indexes rose 2 percent as investors welcomed
Beijing's decision to replace its top securities regulator and on
signs the government was stepping up its economic stimulus efforts.
[.SS]
Tokyo's Nikkei closed up 0.9 percent, helped by a weaker yen,
which fell 0.7 percent to 113.33 per dollar.
The euro fell 0.7 percent to $1.1054, just above last week's low
around $1.1064.
RIGS
Oil prices rose as a reduction in the number of U.S. rigs was
expected to lead to lower output. Global benchmark Brent crude rose
3.2 percent, or $1.07 a barrel, to $34.08.
Russia and the Organization of the Petroleum Exporting Countries
(OPEC) proposed to freeze production at January levels, though
analysts said this would not help cut oversupply which has seen
prices fall 70 percent since mid-2014.
Copper hit a two-week high on hopes for a revival in Chinese
demand. The metal traded up 1.3 percent on the day at $4,682 a tonne.
Zinc hit a four-month high on worries over a potential
shortage.
Gold fell as stocks and the dollar rose. It was last down 2 percent
at $1,203 per ounce.
(Additional reporting by Saikat Chatterjee in Hong Kong, Patrick
Graham and Anirban Nag in Londn and Danilo Masoni in Milan; Editing
by Catherine Evans)
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