FOREX-Yen gains as Brexit stress and anxiety increases; Fed meeting looms

South Korean won, Chinese yuan and Japanese yen notes are seen on U.S. 100 dollar notes in this file photo illustration shot December 15, 2015.

Reuters/Kim Hong-Ji// Illustration/Files.

The yen surged to its highest in more than three years against the euro on Tuesday as opportunities of Britain voting next week to leave the European Union grew, triggering a flight to safe houses such as the Japanese currency. The yen likewise struck a six-week high versus the dollar and an almost three-year peak versus sterling. The dollar though cut its losses versus the yen after a strong U.S. retail sales report for Might, although the data did little to increase the chances of a rate of interest trek by the Federal Reserve in the summertime. The U.S. data’s impact was muted, with the marketplace typically preoccupied by Britain’s future in the EU. As opinion polls continued to reveal the “Leave” camp moving ahead prior to the June 23 vote, and Britain’s biggest offering paper, the Sun, came out in favor of leaving the bloc, sterling fell to a more than two-month low of $1.4093 GBP=.

” The rising tide of volatility has actually raised all boats, making hedging sterling threats through proxy currencies or surrogates extremely, extremely expensive,” stated Shaun Osborne, chief currency strategist ScotiaBank in Toronto. “Our alternative desk notes that liquidity is bad in short-dated sterling choices and non-existent in dates around the referendum. For investors who still desire or require cover, an area position – short sterling or euro versus the dollar or yen – still makes good sense and perhaps provides the most practical hedge now.” The Swiss franc, another conventional harbor in times of worldwide monetary stress, struck a three-month high against the euro EURCHF=, and the dollar acquired versus the euro EUR= and a basket of currencies.DXY.

In late trading, the euro was down 1.0 percent against the yen at 118.84 EURJPY=, while the dollar slid 0.2 percent to 106.05 yen JPY=. Ahead of today’s Bank of Japan conference, traders stated strong resistance around 105.50 has kept the yen from rising to 100 per dollar, the level lots of assume would compel Japan to step in versus its currency.

The debate now amongst traders is whether the BoJ will take policy steps on Thursday focused on deteriorating the currency, when an elect a Brexit next week would be expected to drive more yen buying as a safe house. The dollar returned above 106 yen after data showed U.S. retail sales increased 0.5 percent last month following an unrevised 1.3 percent surge in April. The Fed concludes its policy conference on Wednesday, with financiers anticipating interest rates to hold steady. (Reporting by Gertrude Chavez-Dreyfuss; Modifying by Meredith Mazzilli and James Dalgleish).

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