Sterling got no respite from a relentless sell-off on Wednesday, falling below $1.40 for the first time since the height of the financial crisis in 2009 as investor concerns about a possible British exit from the European Union persisted.
A fall in oil prices, after Saudi Arabia ruled out production cuts, drove a risk-off mood across markets that boosted demand for the safe-haven yen and gave traders yet another reason to sell sterling.
The pound is seen as a higher-risk play among developed-world currencies on account of Britain’s large current account deficit and relatively high interest rates.
The euro fell to an almost-three-year low of 123.04 yen, while the dollar also fell against the Japanese currency, trading at a 10-day low of 111.63 yen that took it close to a 15-month trough of 110.85 hit earlier in the month.
The pound has fallen almost 3 per cent in as many days, putting it on track for its worst week in during David Cameron’s six years as prime minister, following a weekend during which several senior members of his Conservative party threw their weight behind the campaign to leave Europe.
“The factors are the same as the ones we were talking about earlier in the week,’’ said Rabobank currency strategist Jane Foley.
“But the (referendum) polls are still extremely close...and the only thing that could have really lent sterling support would have been if the ‘remain’ campaign was coming ahead with a big margin, which it’s not.’’
The euro, which has also tended to perform well at times of risk aversion in recent months, did not follow the same path as the yen, falling to $1.1012.
“The euro is also getting dragged down a bit by the EU concerns, so if you’re looking for a safe haven you're probably ...more likely to choose the yen,’’ Foley added.
The dollar was expected to have an edge over the yen at the start of the year, when the US Federal Reserve was expected to embark on a series of interest rate hikes after making its first in almost a decade in December.
But recent market volatility has tempered those hike expectations, also enhancing the yen’s appeal, which the Bank of Japan’s shock adoption of negative interest rates in late January has not arrested.
“The yen in theory is not a currency that should be attracting bids,’’ said Koji Fukaya, president of FPG Securities in Tokyo.
“But speculative buying continues to push the yen higher, and the trend will continue as long as participants feel relatively safe buying the currency.’’
Further highlighting the difficulties central banks face in combating deflationary pressures and shoring up their economies, Swiss National Bank (SNB) Chairman Thomas Jordan had said on Monday that unconventional monetary measures had their limits.
The Swiss franc was close to a one-month high against the euro.