The pound fell to a new all-time low in Asia trade amidst growing investor panic following the Brexit vote.
Sterling Falls in Asia Trade as Brexit Weighs on Investor Confidence
On Wednesday, the pound flopped to 1.2798 against the dollar, a 30-year low before slightly bouncing back to $1.2963.
So far, the pound has fallen by an estimated 14% against the dollar following its peak of $1.50 prior to the Brexit referendum.
As investors rushed to inject more of their money in what seem like safer investments, US government bond yields dropped to an all-time low.
Meanwhile, fund managers such as those in Aviva and Standard Life have tried to prevent investors from withdrawing money from their property funds in the UK.
On Tuesday, the Bank of England warned that there was some evidence that the risks of Brexit were beginning to materialize, further weighing on investor confidence.
The pessimism among investors was further fuelled by the disappointing US factory orders and depressive performance in the UK service sector.
Two weeks ago, financial markets reacted to the Brexit vote with the global equity markets losing trillions of dollars, and currencies such as the pound seeing a sharp decline.
The financial market has generally recovered following speculation that central banks will intervene to make the markets more stable.
Even then, there is increasing uncertainty after David Cameron announced his resignation after his campaign for the UK to stay in the EU flopped. This led to a highly contested vote to replace him as the Prime Minister and Conservative Party leader.
In return, investors have rushed to purchase government debt from other countries including Switzerland, Germany, UK and US whose government bond yields have been significantly low.
Performance in Asia markets
The Topix index fell 1.8% down to 1,234.20 as the yen gained strength against the dollar.
Nikkei 225, Japan’s benchmark share index closed 1.85% lower at 15,378.99, even though at one point during the trading session it was 3% lower.
The Kospi in South Korea dropped 1.9% with the won continuing its one-week losing streak.
The Australian ASX 200 share index fell 0.6% closing at 5,197.50 while the Shanghai Composite closed 0.4% up at 3,017.29.