FX round-up: Pound, PacificRim currencies weaker

Cable lost its footing again after the Monetary Policy Committee called attention to the risks for the economy – and for asset prices and the pound specifically – if the ‘leave’ camp is successful in its bid for the UK to abandon the European Union.

As of 15:51 BST cable was trading lower by 0.48% to 1.4136.

The major currency pairs were little changed, with euro/dollar up by 0.05% to 1.1280 and dollar/yen down 0.34% to 108.97, but most Asia-Pacific were sporting losses following an unexpected decision by the Monetary Authority of Singapore to shift to an easier policy stance.

Brexit debated at length by MPC

Back in the UK, rate-setters at the Old Lady on Threadneedle Street kept their main policy settings unchanged, by unanimous vote, all as expected.

However, the minutes of the meeting revealed that the MPC had held lengthy discussions regarding the possible impact that Brexit might have on the economy, with the word ‘uncertainty’ making multiple appearances in the text.

Due to the 23 June vote, the BoE signalled to markets that it would proceed cautiously around that date.

Brexit or no Brexit, the MPC also referenced other risks, saying, for example, that there “remained a question mark over growth prospects in the medium-term” in the US.

China

A smooth rebalancing of the Chinese economy would also remain a challenge, the BoE said.

Precisely in that regard, overnight the MAS reverted back to a policy of zero appreciation for its currency – considered by some to be a bellwether for the wider region - against an undisclosed basket of rivals – for the first time since the financial crisis in 2008.

It was also the first time ever that the island city-state opted for a ‘neutral’ stance outside of a recession.

As a result, Singapore’s dollar retreat 0.89% to 0.7338 versus the Greenback and acted as a drag on currencies from throughout the region in their respective crosses against the dollar, such as Indonesia’s rupiah or Malaysia ringgit.

The kiwi was initially knocked down the hardest, but by the afternoon in London trading was retreating by 0.62% to 0.6877, versus the Aussie which was nursing losses of 0.7719.

According to MAS the move was only meant to remove the path - for a gradual appreciation in its currency – which had been in place for six years.

Thursday’s move from Singapore may also have been the catalyst for the People’s Bank of China’s decision to cut the daily fix for the yuan by 0.46% by the most in three months, to 6.4891.

Acting as a backdrop, the spot US dollar index was 0.13% firmer at 94.87.