The pound slid to the weakest level since November versus the dollar as opinion polls highlighted the risk Scotland will vote for independence next week, potentially splintering the U.K.’s 307-year-old union.
Britain’s currency dropped the most in more than a year against its U.S. counterpart and measures of price swings surged after a poll by YouGov Plc showed the Scottish independence campaign gained a lead for the first time this year. Shorter-maturity government bonds rallied on speculation a vote in favor of a breakup would compel the Bank of England to keep interest rates lower for longer. Financial companies with ties to Scotland helped drag U.K. stocks lower.
“The market looks to be absorbing wave after wave of sterling selling with no appreciable bounce, and to be honest, why buy it?” said Graham Davidson, a foreign-exchange trader at National Australia Bank Ltd. in London. “If they were to vote ‘Yes’ then sterling could drop another 10 percent so the tail risk is big.”