Sterling plunged to a three-decade low in thin early Asian trade on Friday as a break of key technical support levels triggered a wave of stop-loss orders.
The pound fell almost 10 percent at one point to USD 1.1378 before stabilising around USD 1.2415, still down 1.5 percent from late US levels, leaving traders scratching their heads in the absence of news or market events that would justify such a move.
"This was even a bigger move than what we saw after the Brexit vote. There was almost no offer, no bids when this happened," said a trader at a European bank in Tokyo.
A "fat finger" error triggering the automatic stop-loss orders was seen as a possible culprit.
"The move coincided with an FT (Financial Times) story about French President Hollande demanding tough Brexit negotiations.The move was exacerbated once stops were tripped below a key level of USD 1.2600 in very thin trading before the US payrolls," said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney.
The pound has been under renewed pressure on fears of a "hard" exit by Britain from the European Union after UK Prime Minister Theresa May set a March deadline for the formal departure process from the EU to begin.
Asian shares dipped but held not far from the 14-month high touched last month ahead of the US jobs report later in the day, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.2 percent and Japan's Nikkei slipping 0.1 percent.
The US dollar hit its highest level in more than two months and pressuring gold prices, as strong US labour market data gave support to a possible US interest rate hike later this year.
The US dollar also held firm after data on Thursday showed the number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low, boding well for Friday's closely-watched payroll data.
The dollar traded at 103.78 yen <JPY=>, having hit a five-week high of 104.17 on Thursday. The euro dipped to two-week low of USD 1.1125 and last stood at USD 1.1129 <EUR=>.
Strong US jobs numbers could cement expectations of a Federal Reserve rate increase later this year and ripple through markets. Economists polled by Reuters forecast nonfarm payrolls to increase by 175,000.
Interest rate futures are now pricing in about 65 percent chance of a rate hike by December, compared to less than 50 percent late last month.
The 10-year US Treasuries yield hit a three-week high of 1.746 percent <US10YT=RR> on Thursday.
Gold <XAU=> hits 3 1/2-month low of USD 1,250 per ounce, having declined five percent on the week. It last stood at USD 1,255.7. Silver fell more than 10 percent so far this week to hit a four-month low of USD 17.1525 per ounce.
Oil prices continued to climb, with US crude breaking through USD 50, spurred by an informal meeting among the world's biggest producers on output cuts and falling US crude inventories.
US crude futures stood at USD 50.52 per barrel, just below Thursday's four-month high of USD 50.63.
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