The proposal by Scottish nationalists to retain the pound should they win independence would be the only practical option for the new country, currency traders say, even as the plan is rejected by the government in London.
The yen fell to a four-year low against the euro and weakened past 101 per dollar as Japan’s central bank kept its pledge to expand the monetary base as part of the government’s strategy to end 15 years of deflation.
The pound declined from a two-week high against the euro as Bank of England policy maker Spencer Dale said it would take a long time until the U.K. economy was strong enough to justify higher interest rates.
Stocks fell, with Europe’s benchmark index slipping from a five-year high and the Standard & Poor’s 500 Index dropping a second day, as investors weighed rising valuations and disappointing earnings forecasts. Treasuries retreated while natural gas led commodity losses.
The pound strengthened for the first time in four days after the Bank of England signaled that policy makers may consider increasing interest rates sooner than they previously forecast as the economy improves.
The pound strengthened the most in more than a week versus the dollar after a report showed U.K. construction output accelerated in October to the fastest pace in six years, adding to evidence the recovery is gathering pace.
The euro slid the most in six months versus the dollar after the inflation rate in the region unexpectedly cooled, fueling speculation the European Central Bank will cut interest rates to spur the economy.