* Sterling plummets through key support to fresh 31-year low
* Traders cite "hard" Brexit worries but see no clear
* Stocks edge lower ahead of U.S. nonfarm payrolls data
* Disorderly reaction to U.S. rate hike may lead to outflows
* Treasury yields consolidate after recent rise
By Saikat Chatterjee
HONG KONG, Oct 7 Sterling recouped some losses
after plunging to a three-decade low in Asian trade on Friday
amid growing fears of a "hard" exit by Britain from the European
Union, while Asian stocks fell as investors took profits from a
European markets were expected to open slightly higher with
tiny gains forecast for Britain's FTSE, Germany's DAX
and France's CAC.
The pound nosedived 9 percent at one point to $1.1491
after crashing through key support levels, triggering a
wave of selling. An early trade even lower than that was later
But it quickly bounced and it was around 1.2455 by early
afternoon, still down about 1.3 percent from late U.S. levels
and leaving traders scratching their heads in the absence of any
major news overnight.
"This was even a bigger move than what we saw after the
Brexit vote. There were almost no offers, no bids when this
happened," said a trader at a European bank in Tokyo.
The pound has come under renewed pressure as fears grow that
Britain's divorce from the EU will be messier and costlier for
the economy than expected. UK Prime Minister Theresa May on
Sunday set a March deadline for the formal departure process
from the EU to begin.
"The whole thing's been on a precipice since Sunday, since
Theresa May (pointed to) March Brexit negotiations, but the
selling has been very substantial so you can only think its been
part of that general punishment of the pound for Brexit," said
Sean Callow, senior currency strategist at Westpac in Sydney.
"I think we've underestimated how many people had money
positions for a very wishy-washy Brexit or even none. May's
comments have really just started the cleanout and we just
haven't seen any sign of bouncing."
While sterling's move broadly coincided with some news
reports that Britain's separation from the eurozone may be a
tough process, some traders blamed it on a possible a "fat
finger" error triggering automatic stop-loss orders.
"A few stops got triggered in early trading and once cable
broke 1.20, option barriers sent it lower," said Gerrard Katz,
head of Asian FX sales and trading at Scotiabank said. "The
broader market impact has been limited and cable should
consolidate between the 1.20 and 1.25 levels."
Britain's finance minister Philip Hammond tried to reassure
jittery markets on Thursday, saying the UK economy was
fundamentally strong, but he acknowledged that next year will be
The sharp slide in the pound had little impact on other
markets, though Asian stocks extended early losses as investors
moved to the sidelines ahead of the U.S. monthly jobs report
later in the day. If job creation is robust, it may cement the
case for a U.S. rate increase in December.
Economists polled by Reuters forecast U.S. nonfarm payrolls
to increase by 175,000.
MSCI's broadest index of Asia-Pacific shares outside Japan
and Japan's Nikkei both declined around
Stocks in Hong Kong were down 0.5 percent after data from
China showed a third consecutive month of drop in foreign
A disorderly reaction to possible U.S. interest rate hikes
could disrupt capital flows and heighten asset price volatility
in Asia, the International Monetary Fund said on Thursday.
Elsewhere in currency markets, the dollar edged down 0.1
percent against the yen to 103.80 after hitting its
highest level in a month on Thursday.
The euro eased 0.3 percent to $1.1120, poised to shed
1 percent for the week.
The greenback held firm after data on Thursday showed the
number of Americans filing for unemployment benefits
unexpectedly fell last week to near a 43-year low, boding well
for Friday's closely-watched payroll data.
Interest rate futures are now pricing in about a 65 percent
chance of a rate hike by December, compared to less than 50
percent late last month.
The 10-year U.S. Treasuries yield hit a three-week high of
1.746 percent on Thursday before easing slightly to
1.73 percent on Friday.
Gold hit a 3-1/2-month low of $1,252 per ounce,
having declined 5 percent on the week. It last stood at
Silver has slumped more than 10 percent so far this
week to hit a four-month low of $17.1525 per ounce.
Oil prices steadied after U.S. crude broke through $50 a
barrel overnight, spurred by an informal meeting among the
world's biggest producers on output cuts and falling U.S. crude
U.S. crude futures were little changed at $50.53,
just below Thursday's four-month high of $50.63.
(Additional reporting by Cecile Lefort in SYDNEY and Hideyuki
Sano in TOKYO; Editing by Eric Meijer and Kim Coghill)