Sterling could drop almost a quarter of its value against the dollar after a Brexit vote, two economists have forecast

Mark Sands
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How far could the price of sterling fall after a Brexit vote? Two economists say it could drop almost a quarter of its value on the dollar. (Source: Getty)

Sterling's value against the dollar could plummet by as much as a quarter following a Brexit vote, according to a pair of economists.

This week has seen the value of the pound reach a two month low against the dollar, dropping to $1.4137 on the back of fears around a vote to leave the EU.

However, a new paper has suggested that sterling could fall to between $1.30 and $1.10 if Britain votes for Brexit on 23 June.

Dropping to the lower end of the spectrum would equate to a loss of 22 per cent of the pound's value against the dollar.

Read More: Currency chaos as Swiss franc soars

In the paper, Implied Distributions from Gbpusd Risk-Reversals and Implication for Brexit Scenarios, Efficient Frontier Consulting's Iain Clark and Thalesians' Saeed Amen argue that a Leave vote would bear comparison with the January 2015 Swiss currency crisis.

“In the event of a leave vote, we would expect a very high degree of volatility as GBPUSD moves well below 1.30, much as happened in January 2015 after the EURCHF defence level of 1.20 was breached,” the pair write.

By contrast, a vote to remain would boost the value of the currency to $1.48, they said.

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