CURRENCIES: Pound Battles To Recover $1.30 Level After Flash Crash; Dollar Meanders Lower

By Barbara Kollmeyer, MarketWatch Features Dow Jones Newswires

Seconds-long mini 'flash crash' sent pound a cent lower

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The British pound and the euro edged higher on Friday, as the dollar eroded some gains amid ongoing uncertainty surrounding U.S. politics.

The pound rose to $1.2974, up from $1.2934, where it traded late Thursday in New York. Sterling pushed through $1.30 on Thursday for the first time in eight months, thanks to a strong U.K. retail sales report, but then struggled to hold on to that level.

Late Thursday, the pound quickly dropped around a full cent against the dollar in a matter of seconds, which some were referring to as a mini "flash crash." Sterling dropped to as low as $1.2888 before gradually recovering.

"Given the timing of the plunge, it would seem the liquidity of the market as opposed to any particular catalyst was largely responsible for the mini 'flash crash,'" said Craig Erlam, senior market analyst at Oanda, in a note to clients.

The pound has also gained about 7.5% in value over the last 30 days, noted Konstantinos Anthis, in the ADS Securities research team. The late Thursday drop could have been traders taking some of that cash off the table or some concerns over the U.K. Conservative party's manifesto ahead of the election next month, he said.

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The manifesto repeated (https://www.wsj.com/articles/u-k-conservative-party-sets-in-stone-plan-to-leave-eu-customs-union-1495112225?mg=id-wsj) (https://www.wsj.com/articles/u-k-conservative-party-sets-in-stone-plan-to-leave-eu-customs-union-1495112225?mod=mktw)U.K. Prime Minister Theresa May's stance that Britain will walk away from Brexit talks, if it can't reach a deal to its satisfaction.

Oanda's Erlam is among those who believe the pound will go from strength to strength in the months ahead (http://www.marketwatch.com/story/the-pound-looks-set-for-significant-further-upside-now-that-its-regained-130-2017-05-18), if U.K. data continue to perform well. He believes the pound could hit $1.35 if the next few months are calm enough.

The euro , meanwhile, was moderately higher against the dollar on Friday, rising to $1.1123 from $1.1111.

The dollar was down slightly against the yen, adding to recent losses against the Japan currency as turmoil in Washington has sent investors fleeing to haven assets. The dollar was buying Yen111.26 on Friday, down slightly from Yen111.49 late Thursday in New York.

The ICE Dollar Index , which measures the currency against a basket of six major rivals, was trading at 97.61, slightly lower than the 97.66 seen late Thursday in New York.

Outside of the advance services report for the first quarter, Friday's data calendar is quiet. St. Louis Federal Reserve President James Bullard will give a speech on the economy and monetary policy at the Association for Corporate Growth at Washington University in St. Louis, Mo. at 9:15 a.m. Eastern.

Otherwise, investors may continue to watch U.S. headlines for developments on the controversy over President Donald Trump and Russian interference in the U.S. presidential election. Trump begins a multicountry foreign trip, which includes Saudi Arabia, Israel, Belgium and Italy.

Opinion:Ask Arora: How investors can avoid losing their shirt in the age of Trump (http://www.marketwatch.com/story/ask-arora-how-investors-can-avoid-losing-their-shirt-in-the-age-of-trump-2017-05-18)

The Brazil real edged up against the U.S. dollar on Friday gaining 0.3% to 3.37 to the dollar, after plunging Thursday as the country's opposition called for the resignation of President Michel Temer over a bribery allegation.

The news hit Brazil-linked investments (http://www.marketwatch.com/story/brazilian-stocks-are-plunging-after-a-bribery-allegation-against-the-countrys-leader-2017-05-18) hard on Thursday, including exchange-traded funds linked to the country and the Brazil Bovespa stock benchmark .

Meanwhile, the price of one bitcoin rose past 1,900 on Friday, cresting above that level in Asian trading hours. The price of a single bitcoin was up 2.4% to 1,922.77.

(https://twitter.com/BullionBaron/status/865447738556555267)

(END) Dow Jones Newswires

May 19, 2017 04:33 ET (08:33 GMT)