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Brexit

Pound falls sharply on renewed Brexit fears

Kim Hjelmgaard
USA TODAY
Brexit campaigner and former London mayor Boris Johnson waves after addressing a press conference in central London on June 30.

The British pound slumped Tuesday amid renewed concerns about the United Kingdom's vote to leave the European Union.

The pound was down 1.3% to $1.3139 in intraday trading, a level that is near lows seen after the vote on June 23 and the weakest in 31 years.

The declines were related to fears over how Brexit will affect U.K. property prices. London-listed shares in home builders Barratt Developments, Taylor Wimpey and Persimmon all fell 6% before clawing back about half of those losses.

A weaker pound makes the U.K. a relatively more attractive destination for American tourists arriving with dollars to spend but makes it more expensive for U.S. companies and employees based there to repatriate earnings and profits back home.

The market gyrations came as the ruling Conservative Party held the first round of voting to narrow down the field in the race to replace Prime Minister David Cameron, who announced his intention to resign after losing the vote.

Tuesday's vote will whittle down the candidates for Cameron's job to four.

Interior minister Theresa May remains the favorite to replace him. There will be two further rounds of votes by Conservative parliamentarians before the field is narrowed down to two. Then a nationwide vote by Conservative party members, not just lawmakers, will take place. That vote is expected before October.

Brexit backer Farage steps down as UKIP leader

Former London Mayor Boris Johnson threw his support behind Andrea Leadsom, Cameron's energy secretary and a "leave" campaigner who was relatively unknown outside British political circles until a few months ago.

Meanwhile, the U.K.'s central bank said in a report that the outlook for the nation's financial stability was "challenging" following the vote. The Bank of England said banks should free up $200 billion for loans to household and businesses.

Britain's FTSE 100 index bucked the pound's decline, rising 0.3% as Bank of England Gov. Mark Carney tried to reassure investors in a news conference.

"This is a major change," said Carney, referring to the capital requirements. "It means that three-quarters of U.K. banks, accounting for 90% of U.K. lending, will immediately have greater flexibility to supply credit to U.K. households and firms."

Carney said that the volatility was expected, that there was a risk of recession but that markets had managed reasonably well so far.

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