* Sudden pound plunge in thin conditions shocks markets
* Pound slid from $1.26 to $1.1378 in less than a minute
* Later bounces from low but still down 1.5 pct on day
* Jitters over “hard Brexit” take toll on sterling (Updates prices, adds comments)
By Masayuki Kitano and Lisa Twaronite
SINGAPORE/TOKYO, Oct 7 (Reuters) - Sterling plunged to a 31-year low on Friday as anxiety over a “hard” exit by Britain from the European Union triggered a wave of selling, leaving the currency vulnerable to further falls even as it recouped some of the steep losses.
Earlier, the pound suddenly dived about 10 percent from levels around $1.2600 to $1.1378 on some trading platforms. The move occurred in a matter of seconds, in thin early Asian trade.
Sterling quickly bounced back to levels around $1.2500, and after some choppy moves, it was last fetching $1.2432, still down 1.5 percent on the day.
Sterling has been “on a precipice since Sunday, since Theresa May and the March Brexit negotiations,” said Sean Callow, senior currency strategist at Westpac.
“I think we’ve underestimated how many people had money positions for a very wishy-washy Brexit, or even none.”
French President Francois Hollande said on Thursday the European Union needed to remain firm with Britain after it appeared Prime Minister Theresa May had opted for a tougher exit from Europe.
Global markets have been on edge in recent days on worries about a “hard” exit by Britain from the EU and about May’s comments on the impact of loose monetary policy, which some saw as a thinly veiled attack on the Bank of England.
That left the pound in a precarious position and exposed to speculative attacks.
“It seems like algorithm trading was behind all this in thin liquidity conditions,” said a trader for a North American bank, referring to Friday’s sudden plunge in the sterling.
“There were no reasons for sterling to make such big moves.... It was a crazy few minutes.”
A trader for a Japanese bank said the selloff was probably partly caused by the breach of option barriers, and triggering of stop-loss orders in thin market conditions.
Sterling has been wallowing at its lowest levels since the mid-1980s this week, on track for a weekly loss of 4.2 percent, as investors feared the impact of Brexit.
Given the uncertainty around the political and economic fallout of Brexit, sterling is likely to head lower again, analysts said.
“It does look like it could be a hard Brexit. There’s implications there for the City, for manufacturing etc, the way to mollify that, to offset it would be to have a much lower pound,” said Jeffrey Halley, senior market analyst for FX broker OANDA in Singapore.
“So sterling is going to have to go a lot lower.” (Additional reporting by Cecile Lefort in Sydney and Hideyuki Sano in Tokyo; Editing by Lincoln Feast & Shri Navaratnam)