10/06/2016 23:55 EDT | Updated 10/07/2017 01:12 EDT

British pound's 6 per cent "flash crash" baffles traders

HONG KONG — The beleaguered British pound plummeted briefly to a fresh 31-year low Friday amid intensifying concerns about Britain's exit from the European Union.

The pound tumbled nearly 6 per cent in early Asian trading, falling as low as $1.1789, according to FactSet data.

The British currency, which had been trading at around $1.26 the day before, recovered minutes later. It was recently trading around $1.24.

Market watchers were baffled by the pound's "flash crash," which they blamed on various factors including a trader's "fat finger" mistake, a rogue automated trading algorithm making decisions based on news websites or social media; or comments to British media by France's president. Francois Hollande insisted the European Union must take a tough stance in negotiating Britain's exit, known as Brexit, from the bloc's tariff-free single market.

Some speculated it could even have been a combination of those reasons.

"A deluge of negative Brexit headlines could have led to an algo taking that as a major sell signal," Kathleen Brooks, research director at and City Index, said in a commentary. "Once the pound started moving lower then more technical algos could have followed suit, compounding the short, sharp, selling pressure."

The pound has now lost about 17 per cent since hitting a 2016 high of $1.50 on the day of the June 23 referendum in which British voters opted to leave the EU. The decline has accelerated after British Prime Minister Theresa May said Sunday said she would trigger two years of formal exit talks before April.