SINGAPORE: The value of the pound fell to a record low against the dollar on Monday (Sep 26), tumbling nearly 5 per cent at one point to US$1.04.
That was triggered by the British government’s new plan to slash taxes and provide handouts to help families cope with soaring household energy bills.
Paying for that will require the government to borrow billions of pounds, deepening anxiety about Britain’s public finances at home and abroad.
Against the Singapore dollar, the pound sank about 2.7 per cent on Monday, hovering around S$1.50. By Tuesday, the pound bounced back to S$1.55, helped by the Bank of England promising to monitor markets and take action if necessary.
Analysts say the pound will remain volatile this week as markets wait to see how policymakers in the UK respond to the loss of confidence in the pound.
Some money changers CNA spoke to said people seemed to be taking advantage of the weak pound, with online money changer Thin Margin already seeing a higher demand for the currency.
“It is the best time for holidaymakers to travel to Europe,” said CEO Nabeel Ghaffar.
“The stronger Singdollar has improved demand not only for money changing, but money transfer too,” Mr Nabeel added.
He said individuals and businesses may take advantage of the weak pound to buy property, make investments and pay salaries for remote workers.
The weak pound means the Singapore dollar buys more of the pound, which is good news for holidaymakers.
Mr Jalal, who runs AR Money Exchange at Junction 8 in Bishan said he sold at least £10,000 on Monday and expects to sell just as much, if not more, on Tuesday.
He said those travelling overseas would take advantage of the weak pound. So would investors, he added. “They buy and keep, and sell back to us,” he explained.
Two people observing currency rates at a money changer in Raffles Place. (Photo: CNA/Rachel Chan)
Other money changers CNA spoke to on Tuesday morning said there has not been a significant uptick in demand for the pound.
At The Arcade at Raffles Place, home to a cluster of money changers, lines had yet to form at around 10am.
The owner of Shara Exchange, who gave his name as Mr Saleem, noted that while there were people buying the pound on Monday, many are likely to be holding out for better rates.
“There were not many transactions taking place … People may think (the pound) will go down, so they are still waiting. Yesterday, it went down and today it went up a bit – it’s fluctuating. So, people still may monitor,” he said.
Most money changers that CNA spoke to also observed that those who bought the pound were mainly Singaporeans, and that sales could not compare to that of the Japanese yen, which dropped significantly last week.
Demand was so strong that the yen was sold out by about 12.30pm last Saturday, said one trader.
“The pound is unstable now as it is slow-moving, so we see more Singaporeans buying the Japanese yen because the rate is good,” said Mr Abdul Hamid, 50, an employee at MIJ Money Changer.
Besides money changers, the weak pound may also translate into more business for travel agencies.
Luxury travel agency Lightfoot Travel said it has already “felt a jump in enquiries over the weekend”, driven by the pound and the reopening of Hong Kong, one of the agency’s key markets.
“The exchange rates can really affect the way our guests travel from Asia,” the agency’s COO and co-founder Lucy Jackson Walsh said.
“The trend of taking advantage of exchange rates will only increase travel to the UK for all of Lightfoot’s markets – from Dubai, Hong Kong and Singapore,” Ms Walsh added.
“With Hong Kong opening up and the weakening pound, we anticipate a strong surge in bookings,” she told CNA.
Additional reporting by Rachel Chan.