LONDON - The pound reached the strongest level this year hours before the landmark UK vote on membership of the European Union was set to begin.
A gauge of sterling against a basket of currencies advanced for a second day before Thursday’s referendum after a Comres poll showed 48% “Remain” and 42% “Leave,” while a YouGov survey indicated backing for a vote to stay was ahead 51% to 49%. The pound strengthened against all 31 of its major counterparts. Voting booths open at 7am London time.
“The pound is moving in tandem with what bookmakers are showing, which is clearly pointing to one direction,” said Masafumi Yamamoto, chief currency strategist in Tokyo at Mizuho Securities Co. “But the rise in the pound now is no guarantee that the outcome of the actual result will show the stay camp prevailing.”
Sterling rose 0.8% to $1.4823 as of 10:45 am Tokyo time, after reaching $1.4844, the strongest level since Dec 31. The UK currency added 0.5% to 76.48 pence per euro. The yen slid 0.2% to 104.63 per dollar.
Betting on ‘Bremain’
The pound has appreciated 4.4% in the past week, the top performer among developed-market peers. An index of betting flows compiled by Oddschecker shows the chance of Brexit has fallen to about 25% from 43% on June 14.
Among the other currencies moving on Thursday:
*The Norwegian krone, Mexican peso, Hungarian forint and Swedish krona all rose at least 0.5% against the dollar
*New Zealand’s currency was approaching the one-year high of 71.88 U.S. cents reached on Wednesday
*The Aussie dollar touched the highest level since May 3
The pound’s rally has already taken it to levels that some analysts said would be reached immediately after a decision to stay in the EU. The median estimate in a Bloomberg poll of economists earlier this month was for sterling to trade in a range $1.45 to $1.50 the day after a pro-EU victory.
Pound Index
The Bloomberg British Pound Index, which tracks sterling against seven major peers, rose 0.%. It has advanced more than 4% since slumping to a more than two-month low on June 14. The gauge is still down 3.4% this year.
Sterling’s one-month implied volatility against the greenback has declined to 24.28% from 29.49%, the highest level since October 2008 that was reached on June 15, the day before the killing of pro-“Remain” lawmaker Jo Cox. A JPMorgan Chase & Co. index of Group-of-Seven currency volatility has likewise dropped to 11.4%, after closing at 12.79% on June 14, a level unseen since December 2011.
“Even though it looks as though much of the ‘risk of Brexit’ has been priced out of markets, there remains plenty of scope for volatility on either outcome, albeit very much more on a ‘Leave’ than ‘Remain,’” Ray Attrill, global co-head of foreign-exchange strategy in Sydney at National Bank Australia Ltd, wrote in a note, citing polls that continue to suggest the two sides running “almost neck and neck.”
