Yen, Swiss franc gain after Pakistan shoots down Indian jets

London

THE yen and the Swiss franc strengthened on Wednesday after Pakistan shot down two Indian jets, sending investors out of riskier markets and into safer assets.

The Japanese and Swiss currencies both tend to appreciate during bouts of political and economic uncertainty. Pakistan said it downed the planes a day after Indian warplanes struck inside its territory for the first time since a war in 1971.

"The yen is the pick of the major currencies as tensions flare between India and Pakistan and as the bullish global risk mood sours," said Societe Generale strategist Kit Juckes, though he noted the market moves remained limited for now.

The franc scaled a three-week high of 0.9967 against the US dollar and the yen rose to 110.355, its strongest since Feb 15.

Elsewhere, investors watched sterling closely as it rose above US$1.33 for the first time in five months.

The pound rallied on Tuesday after British Prime Minister Theresa May offered lawmakers the chance to vote on delaying Brexit, raising the chance of avoiding a chaotic no-deal departure from the European Union.

The US dollar hovered near a three-week low after shedding 0.4 per cent overnight on comments from Federal Reserve Chairman Jerome Powell about the central bank's shift to a more "patient" policy approach.

The US dollar index against a basket of six major currencies was down 0.1 per cent at 95.928.

"As long as the Fed sticks to its neutral approach there is no monetary policy momentum which would allow EUR-USD to escape from the tedious sideways trade of the past months," said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.

Investors are keeping an eye on the US-North Korean summit, which begins in Hanoi later on Wednesday. US President Donald Trump will meet North Korean leader Kim Jong Un for their second summit, with the United States pushing North Korea to dismantle its nuclear weapons programme.

The euro moved a touch higher to hit a three-week high of US$1.1399.

The euro/US dollar exchange rate has been helped by a stronger British pound recently but will struggle to break much above US$1.1400, said Chris Tuner, head of currency strategy at ING. REUTERS