The declining lead of the "no" vote ahead of the ballot on
whether Scotland will sever its 307-year-old union with the rest of
the U.K. is starting to pressure sterling's robust run.
A YouGov survey conducted for the Sun newspaper and published
Tuesday puts the lead for the "no" campaign at just 6 percentage
points when excluding undecided voters.
That is down sharply from a previous 22-point lead recorded less
than a month ago, and a 14-point lead seen mid-August, excluding
undecided voters.
In early trade Tuesday, the pound dipped 0.5% against the U.S.
dollar to $1.6539. Some tip it for further falls. Daragh Maher, a
currency strategist at HSBC, said that it has the potential to slip
to $1.6250 if the market starts adequately pricing in political
risk.
"We've seen a degree of complacency in sterling about political
risk in the U.K. The most recent polls, however, suggest that a
"no" vote is far from a guarantee," he said.
Sterling has performed strongly so far this year, reaching over
$1.71 in mid-July, a nearly six-year high. Now, with the dollar
resurgent, that is starting to unwind. The narrowing gap in the
Scottish opinion polls now appears to be exerting further
pressure.
"[A "yes" vote] would precipitate a significant financial
accident," said Neville Hill, head of European economics at Credit
Suisse.
"Given that there are no terms of reference, or contingency
plans for Scottish independence if there is a "yes" vote, this has
the potential to deliver enormous financial, economic and, of
course, political risk to the U.K.," he said.
BlackRock Inc., the world's largest asset management firm with
about $4.3 trillion in assets under management, last week said it
is now running negative bets on sterling through options heading
into the vote.
Amundi, which has $1 trillion of assets under management, also
recently switched sterling positions into options that cover the
period up to the referendum date.
The chief investment officer of Kleinwort Benson, which has
GBP5.7 billion under management, meanwhile, has warned that a
winning independence vote could easily see the pound collapse.
Late last month, Alex Salmond, leader of the pro-independence
Scottish National Party, said in a televised debate, that in the
event of a vote for independence, he would seek to negotiate a
formal currency union with the remainder of Britain. All three of
the U.K.'s major political parties have opposed such an
agreement.
Following the publication of the latest YouGov poll, the U.K's
December Gilt slipped a third of a point lower to 113.06 according
to Tradeweb. 10-year U.K. government bonds currently yield
2.419%.
Write to Josie Cox at josie.cox@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires