SINGAPORE: The pound plunged as much as 6.1 percent against the dollar, the biggest decline since the day the U.K.’s Brexit referendum result was announced, in a move that traders said was exacerbated by computer-initiated sell orders.
Some traders saw the possibility of human error, or a so-called “fat finger,” with algorithms adding to selling pressure at a time of day where liquidity is typically low. Others pointed to a Financial Times article citing French President Francois Hollande as saying the U.K. must suffer the consequences of leaving the European Union.
Derek Mumford, a director at Rochford Capital Pty in Sydney, said he and his colleagues were searching for a reason as the pound tumbled, scanning news agency reports and the Internet.
“The speed of the move looks like a kind of a flash crash, some sort of failure,” Mumford said, adding that sterling is set to drop to $1.15 in the coming weeks if it doesn’t recover above $1.28.
