The Bank of England has confirmed that it will investigate the cause of a sharp fall in the value of the pound, which plunged in mysterious circumstances in overnight trading in Asia, Independent reported on Friday.
The news of the investigation came after the pound suffered a jarring flash crash on Friday, nosediving more than 6 per cent against the dollar in a matter of minutes. “We are looking at the causes of the sharp falls overnight,”
the Bank of England said in a statement.
The pound fell as much as 6 per cent to $1.1841 – the most aggressive move since the results of the Brexit vote emerged in June – before recovering to $1.24 against the dollar.
At 10.30am sterling was trading at $1.2372 against the dollar.
The sudden plunge left investors wondering what drove the flash crash.“It was just another quiet day in Asia, and then, Bang! All the lights went red,”
Matt Simpson, senior market analyst at ThinkMarkets, told CNN.
There was speculation a technical glitch or human error had sparked a rash of computer-driven orders.
Naeem Aslam, chief market analyst of Think Markets, said the fall was an indicator of how low the currency could still go.“What we had was insane – call it flash crash but the move of this magnitude really tells you how low the currency can really go,”
said Naeem Aslam, chief market analyst of Think Markets, in a note.“Hard Brexit has haunted the sterling,”
The pound has been very sensitive to politics lately as fears over the consequences of a so-called “hard Brexit”
haunt investor attraction towards the currency.
Theresa May, at the Conservative party conference on Sunday, hinted that the UK was moving towards a Brexit deal that could restrict its access to the European single market, but provide greater control over immigration levels.
Sean Callow, a senior currency strategist at Westpac, said sterling had been “on a precipice”
since her speech.
In a gloomy note HSBC predicted the pound will fall to $1.10 against the dollar and hit parity against the euro by the end of 2017.