By Stanley White
TOKYO (Reuters) – Sterling was at the forefront on Tuesday when investors worried Boris Johnson, who was the front runner to become Britain's next prime minister, would trigger a "hard Brexit" from the EU, much seen as a major risk to the UK economy.
The euro traded near recession due to rising expectations European Central Bank President Mario Draghi will signal an interest rate cut in September at a political meeting later this week to keep inflation expectations on track.
In Asia, regional currencies were mostly seen as moving in large global entities, even though investors are looking at developments in China and the US. trade negotiations.
The dollar was hampered compared to other major currencies as expectations of a US central bank's interest rate cut next week sent the government rate lower.
Speculation about the likelihood of a Brexit without agreement and questions about how far larger central banks will ease monetary policy is likely to set the tone for foreign exchange markets in the coming weeks, traders and analysts said.
"Johnson is expected to become the new prime minister, so there is a real chance of a hard Brexit," said Takuya Kanda, director of research at the Gaitame.Com Research Institute.
"In the short term, further falls in the pound may be limited because positions are already very short. In the medium term, sentiment for sterling will remain soft." at $ 1
Sterling has fallen 3.5% against the dollar over the past three months due to uncertainty about how the UK wi I want to avoid an exit without an EU agreement.
The UK Conservative Party will announce the results of a leadership election on Tuesday, with Johnson expecting to win, and set him up to be Prime Minister Wednesday.
There is growing speculation Johnson will pull Britain out of the EU on October 31 without a trade deal in place.
Hedge Fund has increased short-term pounds to a ten-month high in the week until July 16, the Commodity Futures Trading Commission data show.
The euro () remained stable at $ 1,1208 when traders waited for the ECB's political meeting and Draghi's comments on a press conference on Thursday.
Traders see a 43% likelihood that European policy makers will lower a 10-base governance rate to minus 0.50% to fight global trade risk.
Economists surveyed by Reuters expect the ECB to change the guidelines ahead to pave the way for a rate cut in September.
The dollar was slightly changed at 107 0.91 yen. () Was marginally higher at 97,314.
The US central bank is largely expected to lower its target range of 2.25% -2.50% by 25 basis points at a meeting ending July 31, but expectations of a larger 50-basis-point cut have grown and declined due to of mixed signals from Fed decision makers.
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