The pound value plummeted on Friday, after Brexit results showing the country’s decision to leave the European Union sent investors flooding into safe-haven assets. The pound to yen exchange rate plunged 11% to 139.90 yen.
The Forex market was roiling after U.K. citizens voted on the EU referendum. Most analysts had expected the country would remain in the European Union. But as voting results rolling in Friday morning showed the “leave” side had a decisive edge, the pound value started to plunge.
The decision sent the British currency to its lowest levels since at least 1985. It was the currency’s most volatile session since at least 1986. At 9:57 a.m. ET, the pound to U.S. dollar exchange rate was fetching $1.3775, an over seven percent drop over the previous session.
The pound’s tumble against the yen was also stark. The U.K. currency fetched near 140.87 yen around 9:58 a.m. ET, off from levels of around 160.00 yen early in the Asia session.
That rollercoaster action was a shock to the market. Key Brexit campaigner Nigel Farage declared “independence day” as media outlets began calling the outcome for the leave option, having initially said he believed the “remain” camp had “nicked it.” An initial exit poll Thursday showed 52% of respondents favored staying in the EU, while 48% preferred leaving.
Things could get worse before they get better. Analysts predict the pound value could plunge even further, with some calling for the GBP to U.S. dollar exchange rate dropping to US$1.20. In the current Brexit scenario, the GBP to JPY exchange rate could fall 75.00 yen.
Fear of a Brexit has been driving currency trade recently. Some foreign-exchange traders noted that over the past week or so, customers were “panic buying” euros and dollars to protect themselves in the event the leave camp won the referendum.
Volumes had been exceptional over the past couple of days, with many customers buying other currencies ahead of their vacations in case a possible Brexit sent the pound lower. Some exchanges had run out of euros.
The Bank of England, the International Monetary Fund, and others have warned of the long-term negative effects of a British exit. Some have dismissed those analyses as “rotten propaganda” and most mainstream economists overwhelmingly agreed the move would be bad for the U.K.