By Jemima Kelly
LONDON, July 5 (Reuters) - Sterling hit a fresh 31-year lowagainst the dollar in risk-averse markets on Tuesday, asinvestors worried about the economic and financial fallout ofBritain's vote to leave the European Union.
The pound, the asset that has borne the brunt of marketconcerns about the economic impact of the vote, slid 1.3 percenton Tuesday to hit $1.3112, its lowest since September1985. That left it around 12 percent below its pre-referendumlevels.
Against the Bank of England's trade-weighted basket ofcurrencies, sterling fell to its weakest in more than threeyears.
Standard Life Investments said late on Monday that it hadsuspended all trading in its UK real estate fund, one ofBritain's largest property funds, in one of the first signs ofmajor financial stress since the vote.
The investment house, part of the insurer Standard Life, said the decision had been taken after an increase inredemption requests due to uncertainty following the ballot. Ithad said last week that it had reduced the value of the fund,which invests in UK commercial real estate assets, by 5 percent.
"Sterling hasn't yet reached a post-referendum equilibrium -the risks are still very much skewed towards it trading lowerfrom here," said RBC Capital Markets currency strategist AdamCole. "It will take several more weeks at least for the marketsto take on board the news we've had."
A survey of Britain's services sector showed thatuncertainty in the run-up to the referendum had slowed growthlast month to a three-year low, and sent business expectationsto their weakest since 2012. But Cole said the survey had hadvirtually no impact on the currency, and that investors wouldonly be able to see the real effect on business confidence inJuly.
RISK SENTIMENT SOURS
Standard Life's announcement came after the end of tradingin London on Monday and, with trade thinned by the closure ofU.S. markets for the Independence Day holiday, Tuesday wastraders' first proper chance to react to the news.
"Risk does seem to be under some pressure today - the newsthat Standard Life is suspending trading in its commercialproperty fund is having some impact for sure, and that'scontributing to the generally weaker tone in risk sentiment,"said Societe Generale currency strategist Alvin Tan.
In another sign that risk sentiment had soured, the U.S.10-year Treasury yield, a benchmark for borrowing costs acrossthe globe, fell to a record low as investors sought safe-havenassets.
Against the euro, the pound also skidded by 1 percent to84.90 pence, its weakest since October 2013. Becausethe euro zone is also seen suffering economically from Britain'svote for Brexit, sterling has fallen less against the euro thanagainst the dollar, although the drop since the referendum isnow approaching 10 percent.
The Bank of England will publish its semi-annual FinancialStability Report later in the morning, which analysts said wouldbe an opportunity for the bank to reiterate its ability tomanage the financial system in the aftermath of the Brexit vote,but should not affect the pound much.
British finance minister George Osborne will also meet headsof major banks on Tuesday to discuss how the country shouldrespond to the decision to leave the European Union. (Editing by Kevin Liffey)
