Scotland Ballot Sparks Clamor for Pound Drop Insurance
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The cost of hedging against a weaker pound via options has risen as Scotland’s referendum looms.
For the first time in more than a year, investors need to pay more for protection against a weaker U.K. currency versus the euro than a stronger one. The shift came as gauges of future price swings for the pound surged this week after a survey showed support for Scottish independence is increasing before the Sept. 18 vote. Sterling rose versus the euro after the Bank of England kept its key interest rate at a record low and the European Central Bank unexpectedly lowered its borrowing costs.