RPT-Pound flash crash sends FTSE higher, gilts down
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By Patrick Graham
LONDON Oct 7 (Reuters) - Sterling plummeted as much as 10 cents in just a few minutes of Asian trading on Friday, a "flash crash" that fuelled concerns about the vulnerability of the British currency while adding to the allure of the country's corporate sector.
The pound recovered from the fall, which took it as low as $1.1491 and was driven, dealers said, by the automated algorithmic computer trades that now dominate the global foreign exchange market.
But it was still down 1.4 percent on the day and trading below $1.25 for the first time since 1985.
Gains in shares of internationally focused UK firms, which boost overseas revenues and competitiveness every time the currency falls, drove the FTSE 100 index half a percent higher while other European stock markets fell.
Sterling's battering, however, added to pressure on UK government bonds, pushing 10-year gilt yields 9 basis points higher to 0.951 percent, their highest since the days after Britain voted to leave the European Union on June 23.
"We can dismiss what happened in Asia, but the bias for sterling's performance remains downward," said Neil Mellor, a currency strategist with Bank of New York Mellon in London.
"The speech by (Prime Minister Theresa) May this week thrust the prospect of a 'hard' Brexit upon the market. The fact is that the bias to the downside is going to remain there until we see some details from the negotiating table." Continuación...