Problems for major currencies as uncertainty surges around Brexit

Chris Lee

The foreign exchange markets continued to show some signs of worry on Wednesday after problems which had appeared to be on the way to resolution once again reappeared.

Just last week, the British pound was benefitting from the news that a Brexit deal appeared to be on the cards.

However, despite some further moves between the UK and the EU in an effort to reach an agreement that has a chance of passing the House of Commons, the pound faltered on Wednesday.

Investors in the currency appeared to start selling their positions on Wednesday before the summit scheduled for Thursday and Friday.

It is expected that this meeting will be the crunch moment – and that it will be here that the immediate fate of the two sides will be decided.

The issue of a potential border on the island of Ireland, and question marks over where any potential customs border ought to be located, continues to persist – although officials appeared to be making progress.

Elsewhere in the world, there were signs that the Hong Kong protests could be about to become a salient issue again.

The protests, which aim to restore democracy to the city which is part of a special administrative region of China, have died down in recent weeks.

However, yesterday, the US Congress appeared to indicate that it supported the movements.

This comes as part of a renewal of hopes that the trade issues between the US and China could soon be resolved after a series of talks were held last week.

The Chinese yuan, which is centrally controlled by Beijing in onshore trading but traded on the free currency markets when offshore, was down in both senses.

Onshore, it went down by over a fifth of a percentage point against the US dollar – and saw a drop of around the same amount in offshore trading.

The next move for the currency might be to see whether or not the proposed trade deal takes place, which has been described as being in a “Phase 1” stage.

While this appeared to be taking off when it was first struck last week, all appears to have gone quiet – leading to question marks over whether or not the next phase will be possible.

The US dollar index, an artificial tool which is used to measure how the currency is performing compared to others around the world, was up by a tiny amount of around 0.03%.

It was recorded at 98.322 at one stage.

The Japanese yen, which is often described as a safe haven currency due to its tendency to accrue investment in times of strife in the markets, was also up by a small amount.

It was seen at 108.70 at one stage against the US dollar.

It saw its major gains, however, in its pairs with other currencies.

In a sign that uncertainty is raging for many traders, the yen rose by almost half a percentage point against both the British pound and the Australian dollar.

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