Last update: Sun, 26 Jun 2016 07am

Money and Banking: World


Sterling edged off lows against the US dollar on Friday, recovering slightly from a 10 percent plunge to its weakest in 31 years following Britain's vote to leave the European Union, on reassuring statements from central banks. Sterling was last down 8.1 percent against the dollar, at $1.3662, after touching its weakest since before the 1985 Plaza Accord of $1.3228. Traders said Bank of England chief Mark Carney's comments that the central bank stood ready to provide extra support helped sterling recover.
Currency speculators increased their net short positions against the British pound in the week before the United Kingdom voted to exit the European Union, according to data from the Commodity Futures Trading Commission released on Friday. The number of contracts for net short positions against the pound rose by more than 15,000 for the week ending June 21. That was still well below a five-year high touched during the week ending June 7 when net short positions rose to more than 66,000.
Electronic currency trading platform EBS, owned by inter-dealer broker ICAP, saw a surge in trading volumes on Friday amid sharp swings in the global foreign exchange market prompted by Britain's vote to leave the European Union. Banks had put limits on the electronic trading which makes up as much as 80-90 percent of the $5 trillion a day global currency market in the run in to the vote on Thursday, prompting traders to report a drop off in volumes.
Switzerland's central bank said Friday it had "intervened" in the foreign exchange market to stabilise the Swiss franc, considered a safe haven currency, following the so-called Brexit vote. "Following the United Kingdom's vote to leave the European Union, the Swiss franc came under upward pressure," the bank said in a statement, adding that it had "intervened in the foreign exchange market to stabilise the situation and will remain active in that market."
Sentiment toward most emerging Asian currencies improved in the past two weeks on guarded hopes Britain will stay the European Union and on the US Federal Reserve's caution over rate hikes, a Reuters poll taken before the UK referendum showed. The Indian rupee and the Chinese yuan failed to benefit from slight optimism on the region, according to the survey of 22 fund managers, analysts and currency traders conducted from Tuesday through Thursday.
The Chinese yuan is expected to weaken around 2.5 percent over the coming year as the dollar rallies on expectations of US interest rate hikes and as China's central bank sets lower mid-points for its mostly-managed currency, a Reuters poll found. The yuan posted its second-biggest monthly fall on record against the dollar in May, highlighting Beijing's willingness to allow its currency to weaken and reflecting a resurgent dollar as Federal Reserve policymakers put the prospect of a rate hike on the table as early as this month.
Mozambique's economic growth will likely slow to 4.5 percent in 2016 from 6.6 percent the previous year due to rapidly rising inflation and growing government debt, the International Monetary Fund said on Friday. Michel Lazare, the leader of a Fund team that visited the southern African country, said the discovery of more than $1 billion of previously undisclosed government debt would increase pressure on the economy.