The pound has tumbled to a two-week low against the dollar as turmoil in the oil markets spooks investors and sends them towards safe-haven assets such as the greenback.
Sterling had fallen 1.1 per cent by midday to $1.23. It was last at this level roughly 12 days ago.
Investors around the world sold off shares this morning after US oil prices – specifically oil for May delivery – yesterday evening fell into negative territory for the first time in history.
The unprecedented price moves reflected a huge slump in demand for oil. It was worsened by market technicalities which meant investors were dumping a contract to receive oil in May before it expired.
Following the wild drop in the May WTI oil price (the US benchmark), the June WTI price has slumped today. It had fallen 24 per cent by midday to $15.70 per barrel.
Brent crude, the global benchmark, also plunged. It dropped 19 per cent to $20.80.
The wild movements in the oil markets have spooked investors by underlining how coronavirus has caused demand and production in the economy to evaporate. They have also caused oil majors’ share prices to slump.
This has caused investors to rush towards the dollar. As the currency of global finance and trade, it holds its value at times of stress, meaning investors choose to hold it when they lose their appetite for riskier bets.
On an index against other currencies, the greenback has risen 0.4 per cent by midday.
“Today’s price falls, and the associated sell-off in oil-linked currencies such as the Canadian dollar and Norweigan krone, suggests market participants are bracing for a deeper and longer supply glut,” said Ranko Berich, head of market analysis at Monex Europe.
Read more: Analysis: Why did oil prices turn negative?
The euro was 0.3 per cent lower against the dollar at $1.084.
The pound tumbled 1.3 per cent against the Japanese yen, another currency seen as a safe haven asset. A pound bought 132.1 yen.