European leaders finally sealed a deal Friday on reforms demanded by British Prime Minister David Cameron after hours of haggling in Brussels, paving the way for a referendum on whether Britain will stay in the EU.
The deal sets the stage for campaigning to start in earnest over a so-called “Brexit” ahead of a referendum on June 23.
Cameron is calling for Britain to stay after the deal, but the “In” camp took a blow when London mayor Boris Johnson on Sunday said he would support leaving the 28-member bloc.
Six members of Cameron’s cabinet announced they would support leaving on Saturday, highlighting rifts in the ruling Tory Party.
In Tokyo, the pound weakened to $1.4279 from $1.4392 in New York while it also lost ground against the yen and other major currencies.
The euro edged down to $1.1112 from $1.1131 in US trading, while it ticked up to 125.47 yen against 125.36 yen.
“Even if an exit isn’t likely, uncertainty and concerns about it will continue and weigh on sterling,” Kengo Suzuki, chief currency strategist at Mizuho Securities, told Bloomberg News.
“On the economic front, there isn’t much to undermine the currency, but the uncertainty over a potential exit will cap sterling, keeping it in a $1.40 to $1.50 range.”
In other trading, the dollar firmed to 112.87 yen from 112.62 yen, although it was still lower than the levels above 113 yen seen most of last week.
Analysts said the yen — seen as a safe haven in times of turmoil — may rise again on lingering concerns about Britain’s future EU membership and unsteady oil prices.
Markets are also eyeing Japanese inflation and revised US GDP data due this week, and a meeting of ministers from the Group of 20 set to start Friday in Shanghai.