Reuters.

By Hideyuki Sano

TOKYO (Reuters) – The pound flirted with a 1-1/2-month low against the dollar on Monday on fears of a no-deal Brexit while investors waited for Japan’s ruling party to choose Prime Minister Shinzo Abe’s successor.

The pound changed hands at $1.2806, having touched a 1.2767 one-and-a-half-month low last Friday.

It slipped to a five-and-a-half month low of 92.54 pence per euro () against the euro, latest at 92.47.

The pound has been pressured by fears that Britain will end the post-transition period without any trading arrangements.

London’s explicit admission last week that it could be in breach of international law by ignoring certain parts of the EU’s divorce treaty drew a swift rebuke from the EU chief executive.

Former British Prime Minister Tony Blair and John Major said Sunday that Britain must give up a “shocking” plan to pass legislation to break its divorce treaty with the European Union, in violation of international law.

The dollar was at 106.13 yen , stuck in its familiar territory for the past few weeks.

Chief Cabinet Secretary Yoshihide Suga is poised to become the head of Japan’s ruling party on Monday and prime minister on Wednesday, replacing Japan’s longest-serving leader, Shinzo Abe.

Few market participants expected a radical change as Suga has long been a loyal aide to Abe and has vowed to continue his policies.

“The focus is on his cabinet line-up and whether he will hold snap elections,” said Minori Uchida, chief foreign exchange strategist at MUFG Bank.” He has said he will continue and advance Abenomics, but how much he can advance is a question.”

The euro held steady at $1.18455 () after three straight days of gains.

The common currency was supported after the European Central Bank showed no clear signs of stopping the single currency from appreciating.

The dollar stood little changed against a basket of currency indexes at 93.317 (), with a focus on the Federal Reserve’s policy announcement on Wednesday.

Expectations of further monetary easing by the Federal Reserve weighed on the dollar. It has fallen more than 4 percent so far this quarter.

But some analysts said market expectations for further Fed stimulus may have been too high.

“After shelving yield curve control (YCC) as a near-term policy option, the FOMC does not appear to have reached an operational consensus on how to use the balance sheet,” wrote Standard Chartered Bank (OTC:) strategists in New York in a report.” This could disappoint investors.”

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2020-09-14