Flash crash rocks pound

The Myanmar Times - - International Business -

A DIZZY­ING “flash crash” of the Bri­tish pound sent shock­waves across global mar­kets al­ready hy­per-sen­si­tive to Brexit is­sues on Oc­to­ber 7 and raised fresh ques­tions about the power of thinly-reg­u­lated pro­gram trad­ing.

In a still-un­ex­plained move, the pound plunged more than 6 per­cent against the dollar within min­utes in Asian trad­ing hours.

The cur­rency fell off a cliff at 11:10 pm GMT on Oc­to­ber 6 to strike a 31-year low at US$1.1841, be­fore re­bound­ing back above $1.2439.

The euro also hit a high against ster­ling at 94.15 pence. At 2100 GMT on Oc­to­ber 7, it was at $1.2439, and at 90.01 pence on the euro.

Traders think that in to­day’s tech­dom­i­nated world, it prob­a­bly had a lot to do with com­plex math­e­mat­i­cal equa­tions known as al­go­rithms.

Au­to­mated trad­ing sys­tems can be set up to keep an eye on news head­lines and re­act to po­ten­tially mar­ket-mov­ing in­for­ma­tion.

Bri­tain’s fi­nance min­is­ter Philip Ham­mond down­played the flash crash, blam­ing “tech­ni­cal fac­tors” in the mar­ket. But Bank of Eng­land Gov­er­nor Mark Car­ney has asked the Bank for In­ter­na­tional Set­tle­ments to look into the cause.

The pound’s plunge capped a tu­mul­tuous week of in­creas­ing mar­ket ner­vous­ness over Bri­tain’s planned pull­out from the Euro­pean Union, which could deeply af­fect ex­ist­ing trade and fi­nance re­la­tions and slow re­gional growth.

Bri­tish Prime Min­is­ter Theresa May had said that she would trig­ger the process for Bri­tain’s de­par­ture from the EU by the end of March.

That ig­nited a new round of ver­bal joust­ing over the terms of the break-up. French Pres­i­dent Fran­cois Hol­lande said the Euro­pean Union should take a tough line with Lon­don dur­ing exit talks to pre­vent the breakup of the bloc.

An­a­lysts saw Brexit at the root of the cur­rency’s plum­met. HSBC Bank’s David Bloom said the pound had be­come a “po­lit­i­cal and struc­tural cur­rency”.

“The cur­rency is now the de facto of­fi­cial op­po­si­tion to the gov­ern­ment’s poli­cies,” he said.

Beren­berg bank an­a­lysts said the risks for the pound were “heav­ily tilted to the down­side” and its path would be de­ter­mined by “the noise about and the sub­stance of ” the Brexit ne­go­ti­a­tions. –

Newspapers in English

Newspapers from Myanmar

© PressReader. All rights reserved.