October 7, 2016 / 11:12 AM / a year ago

Market gauge of British inflation highest since at least end 2013

LONDON, Oct 7 (Reuters) - A market measure of long-term British inflation rose on Friday to its highest level since the end of 2013 at least as sterling took a dive on growing anxiety that Britain will opt for a “hard” exit from the European Union.

On Friday, the pound tumbled about 10 percent from levels around $1.2600 to $1.1378 in a matter of minutes in thin early Asian trade.

The currency’s weakness, which increases the cost of imports, has fuelled expectations for higher inflation.

The five-year, five-year breakeven inflation forward, a measure of long-term inflation expectations in Britain, rose to around 3.64 percent at 0833 GMT -- one of its highest levels since late 2013, according to Reuters data.

At 1148 GMT the forward stood at 3.58 percent.

British gilt yields also rose sharply.

The 10-year gilt yield was up 21 basis points this week at 0.96 percent and on track for the biggest one-week rise since August 2015. (Reporting by Dhara Ranasinghe, editing by David Milliken)

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