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[LONDON] The pound fell toward an eight-week low while the yen approached its strongest level since October 2014 as concern the UK will vote to leave the European Union prompted demand for safer assets.
Four polls from three companies have put the "Leave" campaign ahead against "Remain" before the June 23 referendum. A gauge of the pound's one-month volatility climbed to the highest since 2008 as traders prepare themselves for the financial turbulence that may happen after the vote.
A measure of swings in Group of Seven currencies rose to a two-month high before central bank meetings in the US, Japan and UK this week.
"Risk sentiment has taken a beating with volatility up partly on latest Brexit polls still showing the UK is on course to quit the European Union," said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd in Sydney.
"Amid all of of this, the yen continues to demonstrate its preeminent safe-haven characteristics."
Sterling lost 0.6 per cent to US$1.4182 and fell against all 16 major peers as of 1:30 pm Tuesday Tokyo time. It reached US$1.4116 on Monday, the weakest level since April 14.
Implied volatility for one-month options on the pound versus the dollar rose to 28.55 per cent on Monday. That's more than three times the level at the end of last year.
The New Zealand dollar was the next-biggest loser after the pound, dropping 0.4 per cent to 70.30 US cents. The kiwi is retreating from a one-year high reached last week after the central bank left its benchmark rate unchanged. It's the best performer among 16 major currencies in the past month with a gain of 3.8 per cent.
Two new polls by ICM, which published both phone and online surveys, showed the "Leave" side opening up a 5 percentage-point lead over "Remain." Then came a YouGov online survey showing "Leave" at 46 per cent with "Remain" at 39 per cent, and an ORB poll putting "Leave" at 49 per cent and "Remain" at 48 per cent among those certain to vote.
Japan's currency rose 0.2 per cent to 106.03 per dollar, following a 0.7 per cent advance on Monday. It reached 105.55 on May 3, the strongest level since October 2014.
A JPMorgan Case & Co index of currency volatility for seven major currencies rose to 12.05 per cent, the strongest level since April 8.
Abrupt changes in foreign-exchange levels are not desirable, Japan's Finance Minister Taro Aso said on Tuesday. The yen has climbed about 19 per cent since reaching a 13-year low of 125.86 per dollar on June 5 of last year. The yen's surge accelerated after the Bank of Japan's Jan 29 decision to introduce a negative-rate policy fanned volatility.
Just eleven out of 40 economists surveyed by Bloomberg News forecast the BOJ will ease monetary policy at the meeting on June 15-16. While the Fed isn't expected to raise rates on June 15, futures contracts as of Monday show a 46.5 per cent likelihood of an increase by the end of the year, compared with 76 per cent at the start of the month.
"The markets are also wary that the Fed, Bank of Japan and Bank of England are holding their monetary policy meetings this week," Philip Wee, senior currency economist at DBS Group Holdings Ltd in Singapore, wrote in a note.
"Most will be interested to see how much Brexit risks have dampened Fed Chair Janet Yellen's optimism" and there could be surprises from the BOJ.