The British pound has plunged more than 6 percent against the US dollar amid mounting concerns over the UK’s exit from the European Union (Brexit).
The pound lost about 6.1 percent of its value to $1.1841 in a matter of two minutes shortly after currency markets opened in Asia on Friday. The sterling later on recovered to 1.24 against the dollar.
The flash crash left investors stunned and analysts blaming computerized trading programs for intensifying the dizzying plunge.
“I’ve been trading sterling since 1978 through every crisis it has seen, and I’ve not seen anything like this,” said Ian Johnson, FX strategist at 4Cast, the consultancy.
"It was just another quiet day in Asia, and then, Bang! All the lights went red," said Matt Simpson, senior market analyst at ThinkMarkets in Singapore.
It was the biggest intraday drop against the dollar since its 11.1 percent plunge on June 24 in the wake of the EU referendum on June 23, when nearly 52 percent of British voters decided to end the country’s membership in the EU.
The Bank of England said it will launch an investigation into the cause of this shocking plunge.
“We are looking at the causes of the sharp falls over night,” the Bank of England said in a statement issued on Friday.
A day earlier, the pound plunged to a new low against the dollar. The UK currency fell below $1.27 level, down to just $ 1.2621 on Thursday afternoon. This was the weakest level pound has seen since June 1985.
The pound started losing its value after Prime Minister Theresa May confirmed last week the timing of the UK's formal exit from the EU, which she said will happen before March 2017.
Experts have warned that leaving the EU will severely hurt London’s position as a financial hub, unless the UK decides to keep its access to the single EU market by loosening its stance on immigration.