Sterling fell to multi-month lows against other major currencies on Friday on perceptions the UK currency would be allowed to weaken to help the fragile British economy. Market players took the opportunity to dump the pound. Selling accelerated after sterling broke through key technical levels, keeping it vulnerable to further declines, traders said.
By 1503 GMT, sterling was down 0.6 percent at $1.5951 after falling to $1.5917, its lowest since early June. It has fallen swiftly against the dollar from the week's high of $1.6470 struck on Wednesday and is down 1.5 percent so far this week after dropping 2.7 percent the previous week.
Bearish sentiment on sterling has persisted since Bank of England Governor Mervyn King said on Thursday that sterling's fall against major currencies was helping a much-needed rebalancing of the British economy towards exports. "The BoE voiced benefits of a weaker pound for rebalancing the economy, which ties in nicely with the G20 which have been calling for a rebalancing of the global economy," said Ian Stannard, senior currency analyst at BNP Paribas. The euro rose above a key technical level of 92 pence, hitting a peak of 92.20 pence, its highest since early April.
Trade-weighted sterling fell to 78.4 by late London trade, its lowest level since early May. The pound's slide also led Japanese retail traders to liquidate sterling/yen long positions, traders said. Margin traders on the Tokyo Financial Exchange had held a record net long position in sterling/yen at 56,830 contracts as of Thursday.