By Ira Iosebashvili, Rebecca Howard and Anjani Trivedi
HONG KONG--The British pound rose sharply against the U.S.
dollar Friday and hit its highest levels in years against the euro
and yen as early results from Scotland's independence referendum
suggested support for the pro-union campaign.
Five districts representing just 3.7% of the total vote have
reported cumulative results showing a vote against independence,
although a final national tally isn't expected until early Friday
in Scotland. The pound was recently at US$1.6495 in Asia. Hong
Kong-traded shares of HSBC, which has strong links to the U.K.,
rose more than 1%.
"It's a news flow driven thing right now; no one is watching
technical levels," said Sacha Tihanyi, senior currency strategist
at Scotiabank in Hong Kong. Mr. Tihanyi says the pound could hit
$1.66 over the course of the day.
Many investors believe a vote against independence will remove
an obstacle that has impeded the pound's rise against major
currencies. In July, the pound hit its highest level against the
dollar since the financial crisis, but then declined more than 6%
to a 10-month low, a selloff driven partly by the rising popularity
of Scotland's independence movement. In recent weeks, many
investors have come around to the view that Scottish voters would
choose to remain in the U.K., giving the currency a lift off the
lows.
A vote to stay in the U.K. "would remove uncertainty over some
very big issues," said Alan Ruskin, global head of G-10
foreign-exchange strategy at Deutsche Bank. The pound "can now
revert back to the traditional fundamentals which had been driving
it, such as the relative strength of the U.K. economy and
expectations of tightening by the Bank of England," Mr. Ruskin
added.
In a survey conducted by pollster YouGov, 54% of respondents
voted against Scotland exiting the U.K., compared with 46% who
supported independence. YouGov said the survey was based on
recontacting voters after they voted. It was released about 30
minutes after polls closed at 10 p.m. U.K. time.
The movements in the pound came in a busy currency trading
session in Asia, with the yen sliding to a six-year low against the
dollar. It was at $109.23. The euro was also under pressure on
concerns the European Central Bank would resort to more drastic
stimulus measures.
In the run-up to Thursday's vote, investors had expressed
concerns about what currency regime an independent Scotland would
adopt, as well as how the two countries would divide up debt and
natural resources. These worries weighed on the pound, helping to
thwart a rally driven by the belief that the Bank of England would
be one of the world's first central banks to raise short-term
interest rates since the financial crisis, putting it more or less
on even footing with the Federal Reserve.
Economic data point to strong growth in the U.K., and have
served to underscore the country's divergence with Europe and
Japan. The European Central Bank surprised investors earlier this
month with an unexpected rate cut, while many investors expect the
Bank of Japan to continue its easy-money policies as it tries to
kick-start economic growth.
Higher rates boost the appeal of a currency--and assets
denominated in that currency--for money managers.
With the BOE getting ready to tighten monetary policy while
other central banks continue to ease, "the pound is likely to be
one of the better-performing major currencies, in the medium term,"
said Marc Chandler, a strategist at Brown Brothers Harriman.
The bulk of those gains likely will come against currencies such
as the euro, rather than the dollar, as the Fed also is expected to
begin raising interest rates next year, Mr. Chandler said.
The euro was down against the pound, buying 78.26 pence
Write to Ira Iosebashvili at ira.iosebashvili@wsj.com and
Rebecca Howard at rebecca.howard@wsj.com