Yen rises as Fed meeting, Brexit fears stoke flight to safety

[TOKYO] The yen strengthened Friday in Asia as investors shifted into safer investments ahead of central bank meetings in the US and Japan, while Britain's upcoming EU membership vote was also in focus.

Emerging currencies also lost ground against the US dollar, as analysts warned that a pickup in the higher-yielding, or riskier, units may have run its course.

"The rally be could be near an end... so long as the (Federal Reserve) doesn't turn too dovish next week," Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group, told Bloomberg News.

"The weakness this morning is likely due to profit-taking and position adjustment... We have had quite a rally in emerging-markets since the weak US payrolls last week."

Markets are keeping a close eye on the Fed meeting for clues about when it will lift interest rates, which would tend to boost the US dollar at the expense of other currencies.

The Bank of Japan also holds a meeting, with investors keen to see if policymakers unleash more stimulus to boost the struggling economy.

In early afternoon trading, the greenback weakened to 106.98 yen from 107.10 yen Thursday in New York.

The euro changed hands at US$1.1297 against US$1.1315. The single currency is also sitting around three-year lows at 120.91 yen, well down from 121.18 yen in US trading.

Investors tend to buy the yen during times of turmoil or uncertainty.

Growing anxiety that Britain will vote to leave the European Union in a referendum on June 23 is also spreading among traders.

"Ahead of the Fed and BOJ next week, and the (British) vote... the week after, no one wants to take risks today," said Juichi Wako, a senior strategist at Nomura Holdings.

The British pound ticked down to US$1.4447 from US$1.4453.

In other deals, the South Korean won and oil-linked ringgit were the main decliners among the emerging units against the US dollar. The won slipped 0.8 per cent, while the ringgit dropped 0.6 per cent.

The Indian rupee shed 0.2 per cent, Thailand's baht slipped 0.1 per cent and the Philippine peso was off 0.2 per cent.

AFP