Pound falls on weak UK outlook; dollar rises broadly
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A picture illustration shows Mexican pesos and U.S. dollars banknotes in Mexico City July 6, 2015. REUTERS/Edgard Garrido
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By Gertrude Chavez-Dreyfuss and Sam Forgione
NEW YORK (Reuters) - Sterling declined on Monday, after the currency plunged to a 31-year low on Friday in what has been described as a "flash crash" event, with investors concerned Britain will make a hard exit from the European Union.
The dollar firmed across the board as it continued to benefit from expectations the Federal Reserve will most likely raise interest rates in December.
Investors are looking to Wednesday's release of minutes of the Federal Reserve Open Market Committee's meeting in September to determine how close the U.S. central bank was to raising rates. Traders last saw a roughly 70 percent chance that the Fed will increase rates in December, according to CME Group's FedWatch program. But the focus of the market during the U.S. Columbus Day holiday has been squarely on the British pound after the currency's thrashing on Friday. The pound has fallen for three straight sessions.
"Investors predict further declines as hard Brexit seems increasingly inevitable," said Paresh Davdra, chief executive and co-founder of Rational FX in London, an online FX service.
The Bank of England's trade-weighted index, which did not price during sterling's 10 percent off-session crash in Asia on Friday, hit its lowest since 2009 on continuing worries about the impact of Britain's exit from the European Union.
In afternoon trading in New York, the pound was down 0.64 percent against the dollar at $1.2352
The dollar was last up 0.75 percent against the yen at 103.67 yen
The Mexican peso, which has been pressured since May by Trump's promises to clamp down on immigration and rethink trade relations, surged to a one-month high against the dollar as the chances of a victory for the Republican nominee in next month's elections seem less likely.
"The move in the peso is just a confirmation of the market’s feeling that Trump is going to lose," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.The Mexican currency
(Reporting by Gertrude Chavez-Dreyfuss and Sam Forgione; Additional reporting by Patrick Graham in London; Editing by Meredith Mazzilli and Steve Orlofsky)
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