LONDON: Sterling fell on Wednesday, extending the previous day's losses on an opinion poll showing the "Out" campaign in front ahead of a June referendum on whether Britain should remain in the European Union.
Major banks expect sterling could lose around a fifth of its value if Britain votes to leave the EU on June 23. The International Monetary Fund waded into the debate saying a British exit from the EU would risk causing "severe global damage" that would drag down UK growth for years to come.
Sterling was down 0.35 percent at $1.4228, well below a one-week high of $1.4348 struck on Tuesday after data showed British inflation picking up in March. The currency came under pressure late on Tuesday after an ICM poll showed the "Out" camp was ahead of the "remain" camp..
The euro was steady at 79.81 pence, with traders cautious about buying the single currency given the euro zone too would be affected adversely by a possible British exit.
"Brexit would be worse for the UK than the rest of the EU, but it would undoubtedly be bad for all of Europe's economic prospects," said Kit Juckes, currency strategist at Societe Generale.
The pound has lost more than 7 percent this year on a trade-weighted basis and reached a 2-1/2-year low last week, on worries over the Brexit vote.
The pro-EU side says leaving the bloc would cause damage in a country with a trade deficit of 12 billion pounds, its widest in eight years, and a current account deficit that soared to 7 percent of GDP in the final quarter of 2015.
In a note, Westpac recommended selling sterling against the dollar until the vote is out of the day.
"Even if the polls break more clearly toward "Bremain" it's hard to see sterling forcefully unwinding its Brexit premium until the certainty of the vote is out of the way," it said in the note.
Derivatives pricing suggests hedging against an "Out" vote has been widespread, but betting markets show only a roughly one-third chance of a vote to leave.
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