Prime Minister David Cameron and Finance Minister George Osborne sought to send a message of reassurance to markets on Monday but that was unable to stop agencies Standard & Poor’s and Fitch stripping the country of its triple-A rating.
In afternoon trade Tuesday sterling bought $1.3315 in Tokyo, up from $1.3228 in New York, where it at one point sank to $1.3121, its lowest level since September 1985.
Takashi Miwa, chief economist at Nomura Securities, said that investors “could expect a slight rebound” in the currency “in the short run” as a liquidity shortage had apparently been avoided in the aftermath of Thursday’s shock exit vote.
But over the longer run, the unit could still have room to fall – possibly to $1.25 – if the Bank of England eases monetary policy in response to the turmoil, Miwa said.
The pound also edged up against the euro, with the single currency falling to 82.96 pence from 83.22 pence in US trade.
Speculation that Japan could introduce stimulus measures to mitigate the effects of the Brexit crisis weighed on the yen, which has soared since Friday as investor shifted into safe assets.
The dollar rose to 102.15 yen from 101.99 yen, while the euro was at 112.80 yen from 112.42 yen.
Japanese Finance Minister Taro Aso said in a morning news conference that the market regained calm this week, but that he is “watching currency moves with a sense of urgency” as a strong yen hurts the country’s exporters.
“We will firmly take action when necessary,” he said, in comment suggesting possible dollar-buying intervention to weaken the Japanese unit if necessary.