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Yen soars to almost two-year high on early Brexit vote results

Friday, June 24, 2016 - 11:07
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The yen soared to the highest in almost two years as early results from the UK's referendum favoured leaving the European Union, spurring demand for this year's best-performing major currency as a haven.

[TOKYO] The yen soared to the highest in almost two years as early results from the UK's referendum favoured leaving the European Union, spurring demand for this year's best-performing major currency as a haven.

Japan's yen reversed earlier losses and surged as much as 3 per cent against the US dollar, climbing againstall is major peers, after vote counts with 37 of 382 districts in the UK produced a lead for the "Leave" campaign.

 The currency's surge in 2016 after four consecutive years of decline threatens to unwind much of the impact of the Bank of Japan's record monetary easing.

The yen was 2.6 per cent stronger at 103.44 per US dollar as of 10:09 am in Tokyo, after reaching 103.07 for the first time since August 2014. Japan's currency climbed 5.9 per cent to 149.04 per pound.

"If we do see a Brexit, it'll reverse everything: the market will rush into a stronger yen," said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co in Tokyo.

"We might see some expectations for additional Bank of Japan stimulus with the yen below 105 to the dollar. If we approach 100, we might even start seeing the possibility of intervention."

Japan's currency has advanced 15 per cent this year against the greenback, 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.

The yen has resisted efforts by Japanese 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.

Japan's chief cabinet secretary Yoshihide Suga said the day before that sudden, speculative moves have been seen in the currency market, and that he was "extremely concerned".

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.

Some analysts have speculated the Bank of Japan will be under increased pressure to add to stimulus if Britain leaves the EU, while Federal Reserve Chair Janet Yellen cited the Brexit vote as one of the reasons for stalling US interest-rate increases this year.

A gauge of investor expectations for price swings in the yen over the coming week rebounded after dropping to a one-week low, as investor confidence for a "Remain" vote was undermined by the early results.

BLOOMBERG

For more coverage of the EU referendum, visit bt.sg/BrexiT