Pound sinks amid ‘hard Brexit’ fears
Money markets spooked by concerns over UK quitting EU's single market
The sterling has taken another pounding amid fears of a "hard" Brexit ahead of UK Prime Minister Theresa May's speech today.
Yesterday, the pound slid below US$1.20 for the first time since a flash crash last October, which saw it dropping to as low as US$1.138. Apart from October's flash crash, this is a 31-year low against the greenback.
It fell to as low as 1.7126 against the Sing dollar from 1.7446 on Friday, a drop of 1.8 per cent. The pound had plunged 6.8 per cent to S$1.80 on June 24 after a referendum voted for Britain to leave the European Union (EU).
It has also dropped about 19 per cent since the Brexit vote, mainly sparked by concerns that Mrs May would pursue a so-called hard Brexit.
The latest depreciation followed media speculation that Mrs May, who plans to start two years of formal talks with the EU by the end of March, will signal plans to quit the EU's single market to gain tighter control of immigration and explore commercial ties with other countries.
The Prime Minister's office declined to comment on the reports.
But the pound trimmed some of its losses after Bloomberg News reported the UK Treasury is drawing up plans to reassure investors after Mrs May's speech today, and as US President-elect Donald Trump told the Times that he will offer the UK a "fair" trade deal.
The Straits Times quoted CIMB economist Song Seng Wun as saying yesterday: "What's important is whether the UK government will come through with a clear plan today that will give clarity to businesses that are already in the UK to stay in the UK.
"The other EU governments are already dangling incentives to multinationals that have been using the UK as their headquarters.
"There's a dawning realisation that the two-year time frame may not be sufficient. Singapore firms have to be prepared for that scenario."
The falling British pound is good news for Singaporeans, especially those studying in the UK.
Ms Arya Thampuran, a 22-year-old Durham University undergraduate, said: "I was a bit more relaxed with my spending when the pound dipped drastically after Brexit. If the currency exchange stays this way, I can probably consider extending my Easter travel plans.
"But apart from travelling, I don't think I will be buying any big-ticket items since I am still on a student budget."
There are also opportunities for Singapore businesses hoping to expand in the UK.
Those looking to do so will find capital investment costs, such as office space, cheaper due to the weaker pound, noted IE Singapore in a report last August.
But there are risks, said Mr David Britten, director of FX at financial services firm Western Union Business Solutions, who was speaking at a seminar organised by IE Singapore to help businesses understand the implications of Brexit.
"If you're exporting into regions and competing with British businesses for customers, the weaker pound might make your business less competitive.
"If there's a deep recession in the UK and a mild recession in Europe, you might also struggle with your sales," he said.