Sterling may tumble 15% against dollar after a Brexit vote - academic

A UK vote to quit the European Union on 23 June could see sterling plumb depths of around $1.21, or 15% below current levels, a leading academic says, a rate far worse than predicted by market economists.

A string of polls showed the Brexit campaign to leave the EU was gaining traction. At 17:35 BST, sterling was down 0.28% to $1.4217. It was down 0.55% to €1.2604.

Warwick Business School assistant professor Daniele Bianchi warned volatility on sterling exchange rates was likely to worsen as the political debate heated and polls came in tighter.

"Should the UK Brexit in the referendum, the most likely scenario is that sterling could lose around 15% of its current value against major currencies such as the dollar, and around 10% against the euro from the time of writing," Bianchi said, whose statement was issued at 17:17 BST.

Based on the crosses at 17:35 BST, this would put the British unit at a not so great $1.21 and €1.13.

A Bloomberg survey of 20 economists today saw sterling tumbling to $1.35 on a Brexit outcome, with a Bremain decision expected to see it push up to $1.5.

A drop to between $1.30-$1.35 a day after a Brexit result was the average opinion from the poll, with a $1.45-$1.50 range seen under a Bremain scenario.

Rabobank added that should the Brexit scenario materialise, "the 2009 low at $1.3503 will be the initial target for the GBP/USD bears."

Wagering outfit Betfair said today that the implied probability of Britain voting to stay in the EU fell to as low as 64%, down from last Thursday's 78%. Other polls -- by ORB/Independent and separately Financial Times -- showed a leave vote in the leave.

"The pound is coming under considerable pressure again today on the back of the gap in the betting odds being closed," said OANDA senior market Craig Erlam.

He added sterling might yet hit fresh year lows even before the vote. Key cable support was about $1.40, "for now".

Bianchi is an assistant professor of finance and researches empirical asset pricing, commodity markets and financial econometrics.