Sterling fell sharply on Friday as British elections seemed to leave no single party with a clear claim to power, sideswiping investors who had already weathered major risk events in the United States and Europe.

The pound shed as much as three US cents at one point in hectic trade, or close to 2 per cent, before steadying as the results waxed and waned.

Futures for the FTSE eased 0.3 per cent, while yields on 10-year gilts dipped 3 basis points to 1.00 per cent.

The damage was limited elsewhere, with E-mini futures for the S&P 500 flat.

Japan's Nikkei added 0.8 per cent and MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.3 per cent.

The rot started when an exit poll showed Prime Minister Theresa May's Conservative Party could fail to win a clear majority, a shock result that would plunge domestic politics into turmoil and delay Brexit talks.

Early results showed a large swing to Labour but left the outcome in doubt, with the BBC forecasting the Conservatives could hold 322 seats.

The exit poll had predicted the ruling Conservatives would claim 314 seats in the 650-member parliament and the Opposition Labour Party 266, leaving no clear winner when markets had assumed May would easily increase her majority.

Betting agencies were already taking wagers on whether May would lose her job.

“It's clear that the election is a humiliation for the Tories, who blew a massive poll lead in just a few weeks,” said Sean Callow, senior currency analyst at Westpac.

He predicted a hung Parliament would strip the pound of all the gains made since the election was called and leave it wallowing around $1.2500.

“We could be heading for a period of market uncertainty, which will be compounded by the elephant in the room this time around -- the forthcoming Brexit negotiations,” said Michael Judge, head of corporate dealing at broker OFX.

“Investment decisions are likely to be put on hold for the short to medium term -- certainly until we have clarity on who governs the UK. At that moment, that is anybodys guess.”

By 0150 GMT sterling had shed 1.2 per cent to $1.2785, having earlier carved out a two-month trough of $1.2693. It was also down 1.2 per cent on the euro at 87.59 pence.

The Japanese yen gave up early gains to ease to 110.22 per dollar. Highly rated sovereign bonds were in demand with US 10-year Treasury futures gaining 2 ticks.

The euro had less luck against the US dollar, easing 0.2 per cent to $1.1193.

The single currency had slipped overnight when the European Central Bank cut forecasts for inflation and said it had not discussed scaling back its massive bond-buying campaign, sending bond yields to multi-month lows.

No smoking gun

Overnight, Wall Street had seemingly judged the testimony of former FBI director James Comey was not life-threatening to the administration of President Donald Trump.

Comey accused Trump of firing him to try to undermine the investigation into possible collusion by his campaign team with Russia's alleged efforts to influence the 2016 election.

“I think the market is taking less of an alarmist review of this situation because there is no smoking gun here,” said Jefferies & Co money market economist Thomas Simons.

“So it's not particularly impactful for thinking about... Trump's economic agenda to go through.”

The Dow rose 0.04 per cent, while the S&P 500 gained 0.03 percent and the Nasdaq Composite 0.39 per cent.

In commodity markets, spot gold was a whisker lower at $1,274.30 an ounce.

Oil prices remained subdued with Brent having settled at its lowest since November 29, the eve of an OPEC production cut deal.

US crude futures edged up 2 cents to $45.66 a barrel, with Brent crude up 4 cents at $47.90

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