The pound, already struggling to make headway amid concerns
about Britain's departure from the European Union, plummeted to
its lowest since April 2017 in early Asian trading after a
"flash crash" - triggered by massive stop-loss sales in Japan's
yen - forced widespread selling of sterling.
The British currency hit as low as $1.2409 <GBP=D3> against the
dollar, while it fell to as weak as 91.02 pence per euro <EURGBP=D3>,
a 16-month low.
Markets had stabilised somewhat by the European open but the
pound was still lower. Against the dollar it dropped 0.3 percent
to $1.2571. Versus the euro it was half a percent weaker at
90.430 pence.
"There's nothing new in UK news and no reason to own sterling,
though EUR/GBP upside is probably limited to a return to 0.91
[91 pence per euro]," said Kit Juckes, currencies strategist at
Societe Generale.
A widely-watched survey published on Thursday showed Britain's
construction sector fell to a three-month low in December,
though businesses were more upbeat about the coming year.
The IHS Markit/CIPS UK Construction Purchasing Managers' Index (PMI)
fell to 52.8 from 53.4 in November, broadly in line with the
consensus expectation of 52.9 in a Reuters poll of economists.
Adam Cole, chief currencies strategist at RBC, noted that the
construction PMI was "unlikely to get the kind of boost from
inventory building that was the case in the manufacturing
survey". That survey, published on Wednesday, showed that
British factories had ramped up their stockpiling ahead of
Brexit.
The PMI survey for Britain's much larger services sector is due
out on Friday.
Reduced expectations for a Bank of England interest rate rise in
2019 are also weighing on the pound, as are concerns about
whether British Prime Minister Theresa May can convince
lawmakers to back her Brexit withdrawal arrangement before a
scheduled departure date in March.
A parliamentary debate on May's deal with Brussels kicks off
next week, with a vote scheduled for the week of Jan. 14.
(Editing by Matthew Mpoke Bigg)
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