The pound dropped sharply on Friday, losing nearly 1% against the euro and the dollar as worries about the fast-spreading coronavirus sent investors out of currencies deemed riskier.
As investors rushed for the safe-haven Japanese yen, Swiss franc and U.S. dollar, sterling fell to its lowest against the dollar since October. Other currencies closely linked to risk sentiment also tumbled โ the Australian dollar fell 2%.
Analysts said that while there was no sterling-specific news on Friday, Britainโs finances had left it vulnerable โ its large current account deficit means the country depends on overseas investment.
Investors are also fretting about Britainโs negotiations with the European Union over a trade deal and whether a UK budget next month will include much more spending, which many investors say is necessary to boost economic growth.
โWhile country-by-country tallies of COVID-19 shows an un-alarming total of 15 in the UK, its near 5% current account deficit means a tightening of financial market conditions leaves currencies like the pound vulnerable to the downside,โ MUFG analysts said in a note.
Sterling skidded to as low as $1.2760 in late London trading before recovering to $1.2775, down 0.8% on the day.
Versus the euro the pound dropped to as low as 86.08 pence . That was the weakest level for sterling since November and means the pound has erased all of its gains made in the run-up to the British general election in December.
REUTERS
