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Sterling dips as coronavirus fears rattle nerves, boost euro

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LONDON: The pound dropped on Friday, particularly against the euro, as worries about the fast-spreading coronavirus sent investors out of currencies deemed riskier.
With the biggest moves in the safe-haven Japanese yen, Swiss franc and in euro/dollar, where a sudden drop in U.S. interest rate cut expectations have whacked the greenback, sterling has been somewhat of a sideshow in markets this week.
Still, the pound has lost 2.5% versus the dollar this month and almost 2% against the euro as investors fret about Britain’s negotiations with the European Union over a trade deal and whether a UK budget next week will include much more spending, which many investors say is necessary to boost economic growth.
Graphic: Trade-weighted sterling since Brexit vote – here
The broad slump in risk appetite caused by the coronavirus spread has not helped the pound, either.
“While country-by-country tallies of COVID-19 shows an un-alarming total of 15 in the UK, its near 5% current account deficit means a tightening of financial market conditions leaves currencies like the pound vulnerable to the downside,” MUFG analysts said in a note.
Sterling traded at $1.2880 in early Friday trading, slightly lower on the day, while it lost 0.4% against the euro at 85.70 pence – its weakest since mid-January.