Pound at 5-1/2 Month Lows on Fears of No-Deal Brexit

The British pound fell to five-and-a-half month lows on Tuesday in Asia as fears over the threat of a no-deal Brexit resurfaced.

Sterling was at 1.2532 by 1:18 AM ET (05:18 GMT) after falling to a low of 1.2514, its weakest level of the year following reports that former U.K. Foreign Minister Boris Johnson is now the front-runner to replace Prime Minister Theresa May.

Johnson has previously promised to lead the United Kingdom out of the EU “with or without a deal.” Odds of him succeeding May increased after one of his former rivals and EU supporter Matt Hancock reportedly backed him.

The EUR/USD pair was up 0.2% to 1.1235, while USD/JPY was down 0.3% to 108.28 as investors awaited policy-setting meetings by the U.S. Federal Reserve and the Bank of Japan as well as a conference organized by the European Central Bank this week.

The US Dollar Index, measured against a basket of six currencies, dropped 0.1% to 96.96, not far from a three-month low of 96.405 reached earlier this month..

The dollar remained on the defensive after data on Monday showing that manufacturing activity in the New York area fell to a two-and-a-half year low in June.

The USD/CNY pair traded near flat at 6.9265. Data from the Treasury Department revealed that China’s holdings of notes, bills and bonds declined by $7.5 billion in April to $1.11 trillion after Beijing its U.S. Treasury holdings to the lowest level in two years.