The pound weakened to almost 80 pence against the euro and the cost of hedging rose as investors grew more concerned about the outcome of next week’s EU referendum.
It could mean bad news for retail businesses in border areas in the Republic, as shoppers may capitalise on the weaker pound and shop in Northern Ireland.
UK voters head to the polls on Thursday week in a poll that will decide the future of the country in the European Union.
Polls indicate the decision is on a knife edge, with a lead for the remain camp switching to gains for those in favour of a so-called Brexit.
A weakening UK currency is bad news for Irish exporters as it increases their margins.
By late afternoon yesterday, the euro was worth around £0.7889, up from the 76 pence mark it had strengthened to in recent weeks. But earlier in the day it had reached £0.7986.
Investors have grown increasingly jittery, and sterling volatility has increased, as the opinion polls suggest momentum is growing for the leave camp.
“I would expect volatilities to rise further and the markets will become even bleaker as we head towards the referendum,” said Koichi Yoshikawa, executive director of finance at Standard Chartered Bank.
Investors are choosing to put their money into both the US dollar and the Yen, with the pound falling to a three-year low against the Japanese currency.
UKIP leader and Brexit advocate Nigel Farage said the prospect of a fall in the value of the pound is nothing to worry about. Mr Farage said people should not be worried by “ludicrous scare stories”, adding that a weaker pound would benefit UK exporters.
The pound tumbled the most since February on Friday after an ORB/Independent poll showed a 10-point lead for ‘leave’.
Surveys at the weekend were less stark, with one online poll by Opinium for the ‘Observer’ newspaper showing 44pc support for Britain staying in the EU and 42pc against.
Britain’s hefty current account deficit – 7pc of output in the last quarter of 2015 – makes the economy, and the currency, vulnerable to any pull-back in investment flows.
Worries about Brexit have also contributed to the UK economy losing momentum in recent months, and investors have pushed back rate hike expectations to the end of the decade. UBS, a leading foreign exchange player, said there were signs that growth may slow further in the second quarter and some policymakers on the Bank of England’s monetary policy committee could consider rate cuts.
Meanwhile, research conducted by the ESRI found that Ireland and the UK are perceived to be similar as alternative locations for FDI in particular by investors from outside the EU and for FDI in the services sector.
“This result suggests that a possible redirection of FDI from the UK to Ireland in the case of Brexit would be more likely by investors from outside the EU and in the services sector,” said Dr Iulia Siedschlag, ESRI associate research professor.
But the report warned that a more competitive tax rate in the UK would hinder Ireland’s ability to attract foreign direct investment. The research said that a reduction in the UK’s corporate tax rate by 1 percentage point, from 20pc to 19pc, would reduce Ireland’s attractiveness to new FDI projects from non-EU countries by 4.3pc. (Additional reporting agencies)
Article Source: http://tinyurl.com/kbwqb42
- Dublin pips Paris to become dearest city in Eurozone
- Why you should work for a startup over a corporate
- Monday 25 June 2018 ‘I gave up my job and life savings to start my Irish clothing brand’ – Gym+Coffee CEO and co-founder Niall Horgan
- New MSD drug plant in Dublin gets nod
- The Big Tech Show: Why are we freaking out about Amazon jobs?
- 21 Belvedere Place, Dublin 1
- +353 1 855 4188
- +353 1 836 6550
- 26 Jun 2018Dublin pips Paris to become dearest city in Eurozone
- 26 Jun 2018Why you should work for a startup over a corporate
- 25 Jun 2018Monday 25 June 2018 ‘I gave up my job and life savings to start my Irish clothing brand’ – Gym+Coffee CEO and co-founder Niall Horgan
- 22 Jun 2018New MSD drug plant in Dublin gets nod
- 22 Jun 2018The Big Tech Show: Why are we freaking out about Amazon jobs?