Blame game heats up as ster­ling en­dures one of its worst days ever

Weekend Argus (Saturday Edition) - - FRONT PAGE - PAN PYLAS and KELVIN CHAN

LON­DON: As if it wasn’t shaky enough, the Bri­tish pound en­dured one of its big­gest falls ever yes­ter­day with some in the mar­kets blam­ing trad­ing ro­bots or a fat-fin­gered typo for send­ing the cur­rency down a pre­cip­i­tous 6 per­cent in just a cou­ple of min­utes.

For one of the world’s ma­jor cur­ren­cies, which is held as a re­serve of value by coun­tries around the world, that’s a huge move, matched only by its fall in the wake of dra­matic events like the June vote to leave the EU.

Early yes­ter­day dur­ing Asian hours, the pound tum­bled from $1.2600 to as low as $1.1789 in the space of two min­utes, ac­cord­ing to fi­nan­cial data provider Fact­Set. It later re­cov­ered some­what to trade at $1.2365, but still that’s a level the cur­rency hasn’t seen since 1985.

The crash oc­curred dur­ing a “twi­light pe­riod” in the mar­kets – af­ter the close in the US and just as Asian traders were start­ing their day. That means the vol­ume of trad­ing was likely lower than usual and rel­a­tively smaller trades can have an out­size im­pact.

Var­i­ous rea­sons have been cited for the drama in­volv­ing what is one of the world’s old­est cur­ren­cies. Some say a trader made a “fat fin­ger” mis­take typ­ing in a mar­ket or­der.

Oth­ers say it could have been an au­to­mated trad­ing al­go­rithm that makes de­ci­sions based on news web­sites or so­cial me­dia, or com­ments by France’s pres­i­dent, Fran­cois Hol­lande, who said Bri­tain should pay for its de­ci­sion to leave the EU.

Or some sort of com­bi­na­tion of them all. The Bank of Eng­land is in­ves­ti­gat­ing.

The pound is al­ready in the dol­drums, post­ing a se­ries of new 31-year lows against the dol­lar this week as traders fret over the un­cer­tainty sur­round­ing Brexit. Though the Bri­tish econ­omy has held up bet­ter than ex­pected in the im­me­di­ate af­ter­math of the “leave” vote, there are great longert­erm un­cer­tain­ties sur­round­ing the Bri­tish econ­omy.

The main worry in the cur­rency mar­kets cen­tre on what a clean Bri­tish break from the EU, which is look­ing like the pre­ferred op­tion of new prime min­is­ter Theresa May, would look like.

May said this week she would in­voke by the end of March the so-called Ar­ti­cle 50 of the EU treaty, the mech­a­nism by which two years of talks on Bri­tain’s exit of­fi­cially com­mence.

She also ap­peared to sig­nal that her govern­ment would pri­ori­tise con­trols on im­mi­gra­tion over ac­cess to the Euro­pean sin­gle mar­ket, an ap­proach in­for­mally called a “hard Brexit.” – ANA-AP

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