Brexit pain begins

The United Kingdom’s currency pound sterling lost as much as 10 per cent of its value 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 selling by Euro-pean and US investors quashed any bounce as first London and New York came on line, driving a 2.5 per cent loss on the day and putting sterling on course for its biggest weekly fall since 2009. But sterling’s tumble added to pressure on UK government bonds, pushing 10-year gilt yields as much as 11 basis points higher.

Adding to jitters on financial markets, Fre-nch President Francois Hollande said Britain will have to pay a heavy price for leaving the Eu-ropean Union, adding to deep concern in financial markets.

He called for “firmness” by the EU powers in Brexit negotiations to avoid the risk that other countries might seek to follow Britain’s lead and leave the bloc. “There must be a threat, there must be a risk, there must be a price,” he said.