TOKYO: Sterling wallowed near a more than two-year low on Tuesday on growing investor worries about a "no-deal Brexit" as rival British lawmakers fought for control over negotiations to leave the European Union.
The euro fell to the lowest in more than two years as weak economic data from the EU underscored expectations for the European Central Bank to ease monetary policy at a meeting next week.
The yuan will come into focus during Asian trading after it slipped to a record low versus the dollar in offshore trade due to fading hopes for a resolution to the U.S.-China trade war.
The pound is likely to remain under pressure ahead of a vote in Britain's parliament about Brexit later on Tuesday, the outcome of which could trigger an early election and Britain's exit from the EU without trading agreements.
A messy exit from the EU is certain to weaken the pound, but it could roil other currencies as investors adjust their positions to exit trades in riskier assets.
"The pound is being sold all over the place, because the political risk has forced us to recognise that a no-deal Brexit is possible," said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
"At this point, I see no reason to stay long in sterling."
Sterling traded at $1.2063, flat so far in Asian trading but close to the lowest in more than two years. The pound tumbled 0.8% on Monday, its biggest decline in more than three weeks.
The euro was flat at 90.91 pence, holding onto a 0.7% gain on Monday.
A group of lawmakers will put forward a vote on Tuesday on whether to seize control of the parliamentary agenda to try to force a three-month delay to Britain's EU exit deadline of Oct. 31.
Johnson raised the stakes on Monday, however, effectively turning it into a confidence vote by making it clear that if the government was defeated, it would hold a vote on Wednesday to approve an early election, most likely to be held on Oct. 14.
Some politicians have warned that a no-deal Brexit should be avoided at all costs, because leaving the EU without trading agreements in place could cause economic turmoil.
Elsewhere in currency markets, the dollar index rose 0.27% on Tuesday to 99.082, reflecting weakness in other major currencies. U.S. financial markets were closed on Monday for a public holiday.
In the offshore market, the yuan traded at 7.1940 per dollar, close to its weakest since international trading in the currency began in 2010.
The yuan weakened after Bloomberg News reported that Chinese and U.S. officials are struggling to agree a schedule for a round of trade negotiations that were expected this month.
The United States and China have been locked in a bitter trade dispute for more than a year, which is causing the global economy to slow.
The euro fell to $1.0954 in Asia on Tuesday, which is the lowest since May 2017. The common currency fell 0.2% on Monday. Sentiment for the euro had already weakened after it broke below the key $1.1000 level last week.
The euro weakened further after a survey on Monday showed European manufacturing contracted for seven straight months.
The Australian dollar fetched $0.6712, down 0.07% in early trade.
The Reserve Bank of Australia is expected to keep its cash rate at a record low of 1% on Tuesday, though it will likely cut again two more times to boost inflation and support a stuttering economy, a Reuters poll showed.
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