Sterling takes another tumble as investors seek safety in dollars

• Sterling has been under pressure because of a massive wave of selling of most currencies other than the dollar.
• Sterling was last down 0.6pc at $1.16 after earlier hitting as weak as $1.1536.
• Against the euro the pound dropped 0.4pc to 92.13 pence, still some way off last week's lows of 95 pence.

LONDON: The British pound weakened on Monday, heading back towards the 35-year lows hit last week as investors rushed to buy the US dollar amid another round of panic about the economic hit from the coronavirus crisis.

Sterling has been under pressure because of a massive wave of selling of most currencies other than the dollar, which is the world's most liquid currency and the safe haven of choice when confidence evaporates from financial markets.

But the pound has also been hit by investor concerns that Britain's approach in dealing with the virus, which has seen a more staggered disruption to economic and everyday life than in other countries, is not the right one.

Britain's large current account deficit has also made sterling vulnerable, while drastically poorer liquidity last week exacerbated the move downwards.

Some analysts have been impressed by the British policy response to the crisis, however. The Bank of England has slashed interest rates to record lows, ramped up its quantitative easing programme and the government announced significant fiscal stimulus.

"The broken financial environment means that GBP is not able to respond to the proactive fiscal support undertaken by UK policy makers," ING analysts said in a research note.

Sterling was last down 0.6pc at $1.16 after earlier hitting as weak as $1.1536.

The pound last week hit $1.1413, its lowest since 1985.

Against the euro the pound dropped 0.4pc to 92.13 pence, still some way off last week's lows of 95 pence.

Kit Juckes, an analyst at Societe Generale, noted that according to positioning data, as of last Tuesday there had only been a small reduction in the long positions on the pound.

That would make the currency vulnerable to further falls as investors cut their long positions.

"Has the slide since Tuesday cleared the longs? It seems doubtful," he said.