Pound Hits 2016 Peak, Then Drops on Brexit Results

The pound dropped against the dollar as results of Britain’s European Union referendum showed a smaller-than-forecast win for “Remain” in Newcastle.

Sterling fell 0.3 percent to $1.4833 as of 12:01 a.m. London time, after touching $1.5018, the highest level since December

The pound earlier Thursday reached the strongest level this year as British voters cast their ballots in a referendum on the nation’s European Union membership.

A gauge of sterling advanced for a second day, while the currency headed for its best week since 2009 against the dollar as two polls conducted before Thursday showed a lead for the campaign to keep Britain in the European Union.

Still, a measure of implied overnight price swings versus the dollar climbed to the highest level on record, as traders sought protection from outsized price swings. Voting began at 7 a.m. London time and ends at 10 p.m.

The pound has acted as a barometer of sentiment since the start of the campaign in February, rising or falling depending on which side of the debate was gaining momentum. Sterling has climbed about 8 percent since sliding to a seven-year low of $1.3836 on Feb. 29, about a week after the date of the vote was announced, and has rallied from as low as $1.4013 last week.

“We saw the pound recover further overnight,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “From now on, market participants will wait and see.”

Sterling rose 1.1 percent to $1.4868 as of 4:03 p.m. New York tim after reaching $1.4947, the highest level since Dec. 28. It has climbed 3.6 percent this week.

Bloomberg’s British Pound Index, which tracks sterling against seven major peers, climbed 1 percent. A gauge of overnight volatility, based on option prices, touched 119.7 percent Thursday, the highest since Bloomberg began collecting the data in 1998.

In two opinion polls conducted June 21-22, the “Remain” camp was shown to be in front.

“There remains plenty of scope for volatility on either outcome,” Ray Attrill, global co-head of foreign-exchange strategy in Sydney at National Bank Australia Ltd., wrote in a note, citing polls that suggest the two sides running “almost neck and neck.”

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