10 June, 2017
"I think it was more of a relief (for the dollar) than anything else", said Sireen Harajli, FX strategist at Mizuho in NY.
Sales made by multinational companies listed on the FTSE 100 can benefit from a weaker value of sterling, and in turn make their shares more attractive to investors.
That was triggered after Britain's Conservative Party fell short of winning at least 326 seats needed to control the House of Commons.
As reported at 11:03 am (BST) in London, the GBP/USD was trading at $1.2912, a gain of 0.08%; earlier, the pair had hit a session peak at $1.29506 while the low was at $1.28928.
The surprise result raised questions about how Britain will advance with its plan to leave the European Union, and whether any party can form a stable government, It sent the pound to eight-week lows against the dollar and its lowest levels in seven months versus the euro.
While the decline means the pound will not go as far for Britons travelling overseas, the dip pales in comparison to the 10 per cent decline the day after the European Union referendum, when sterling traded for $1.32. The benchmark is still down 0.6 percent in the past five days. Japan's Nikkei added 0.5% and MSCI's broadest index of Asia-Pacific shares outside Japan ended the day all but flat.
An exit poll showed Prime Minister Theresa May's Conservative Party could fail to win a parliamentary majority, a shock result that would plunge domestic politics into turmoil and could delay Brexit talks.
But in the moments after the exit poll predicted the Conservatives would be the largest party, but with fewer MPs (BSE: MPSLTD.BO - news), the currency dived to around $1.2730 in Asian trading- its lowest point since the election was called in April.
Betting agencies were already taking wagers on whether May would lose her job, and one even had Labour leader Jeremy Corbyn as favorite to become PM.
John Wraith, a strategist at UBS, said there was a high likelihood of a potentially prolonged period of uncertainty over whether May would be replaced.
Simon Phillips, retail director at No1 Currency, commented: "For now the pound's prospects look much like Theresa May's - clouded with doubt".
On the other hand, the vote's outcome may in fact suggest a "hard Brexit" is less likely, which could push the pound back up in the longer term.
The Japanese yen briefly gained on risk aversion, only to fade to 110.05 per dollar as the morning progressed.
Italian bond yields fell again on Friday as the head of the country's ruling Democratic Party, Matteo Renzi, said he was pessimistic over the chances of reaching a new cross-party pact on a reform of the electoral law. Instead, the political uncertainty coming from the result is partly compensated by the small chance that Brexit may not happen and by the hope that United Kingdom may opt for a less hard Brexit.
Overnight, Wall Street had seemingly judged the testimony of former Federal Bureau of Investigation director James Comey was not life-threatening to the administration of President Donald Trump.
