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Yen soars past 100 per US dollar as UK vote spurs rush to safety

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The Japanese yen soared past 100 per US dollar for the first time since November 2013 as Britons voted to quit the European Union, spurring demand for this year's best-performing major currency as a haven.

[TOKYO] The Japanese yen soared past 100 per US dollar for the first time since November 2013 as Britons voted to quit the European Union, spurring demand for this year's best-performing major currency as a haven.

The yen surged as much as 7.2 per cent to 99.02 against the greenback, climbing against all its major peers.

Investors and analysts have said a move past 100 would put pressure on Japanese authorities to intervene to weaken the currency as its advance in 2016 threatens to unwind much of the impact of the Bank of Japan's record monetary easing. The central bank's stimulus has been a key part of Prime Minister Shinzo Abe's so-called three arrows aimed at reviving his nation's economy after more than a decade of deflation.

"All hell is breaking loose," said Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd.

"It looks like markets are now lurching because the prospects of Leave is now looking more tangible. The only surefire is you buy yen, you buy US Treasuries, you buy gold, and you sit tight. Whoever is hurting probably already hurt."

Yen Surge

The yen was 3.7 per cent stronger at 102.42 per US dollar as of 7:04 am in London. It gained as much as 18 per cent against the UK currency, the most since at least 1971 to touch 133.31 per pound.

After four consecutive years of declines, the yen has advanced 17 per cent this year against the greenback in the best performance among developed nations, amid concern a Brexit would drag down already-tepid global growth.

The yen gained at the start of the year on speculation China and the US - the world's largest two economies - will struggle to overcome headwinds.

Powered by unprecedented central bank easing, the yen reached a 13-year low of 125.86 in June of last year. Its strength since then comes despite BOJ governor Haruhiko Kuroda and his board's surprise introduction of a negative deposit rate in January.

The BOJ stands ready to provide sufficient liquidity, including using swap arrangements among six central banks, to ensure the stability of financial markets, Kuroda said in a statement Friday.

Stimulus Pressure

Some analysts have speculated the BOJ will be under increased pressure to add to stimulus if Britain leaves the EU. The inflation index that serves as the benchmark for progress toward Mr Kuroda's 2 per cent inflation goal fell 0.3 per cent in April for a second month, after stagnating since the start of 2015.

Mr Kuroda said June 16, after leaving policy settings unchanged for a third meeting, that the UK referendum was "making international financial markets somewhat unstable," and he will carefully monitor the impact of the vote.

He reiterated the central bank won't hesitate to add to stimulus if necessary, while declining to comment on the potential for an unscheduled policy meeting.

Abrupt Moves

The yen has also resisted efforts by Japanese government officials to talk it lower. Finance minister Taro Aso said June 17 he wants "to coordinate closely with other nations to deal with" abrupt moves in the yen, while adding earlier this week that Japan won't intervene without due consideration.

He said Friday appropriate measures can be taken in foreign-exchange markets if needed and Group-of-Seven nations have currency swap agreements that can be used if required. He declined to comment on whether there had been intervention by authorities.

The Ministry of Finance views unilateral intervention as an unlikely tool in the event of a surge in the yen should the UK vote to leave the EU, according to people familiar with the matter, Bloomberg reported earlier this week.

"The yen may trade through 100 again today as European asset markets react adversely when they open for trading," said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc.

"But the risk of intervention will restrain further gains in the next couple of trading sessions."