In Daily Currencies Ratings 30/06/2016
The yen is flipping between its biggest monthly advance since 1998 and 2008 as financial turmoil sparked by the U.K.’s decision to leave the European Union spurs a global flight to haven assets.
During Thursday’s session in Asia, Japan’s currency swung between its strongest monthly performance since a 7.8 percent rise in October 2008 and an 8.2 percent surge in December 1998. It is also the top performer against the pound among 10 developed-market peers, as sterling plunged after Britons voted in a June 23 referendum to leave the trading bloc. The yen pared its Brexit-driven gains in the past two days as stocks recovered some of the losses incurred from the sell-off.
“It would be premature to suggest the recovery in risk sentiment has solid legs,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Post Brexit, the expectations of a lower for longer yield environment and the U.K. political vacuum until September are providing a sense of calm and they are providing an uplift to risk assets. So risk appetite is reappearing, but only cautiously.”
The Japanese currency rose 0.2 percent to 102.68 per dollar as of 7 a.m. in London after completing a two-day drop of 0.8 percent on Wednesday. The currency reached 99.02 on June 24, the highest since November 2013. It climbed 0.6 percent to 113.75 against the euro. The pound has weakened 7.6 percent this month to $1.3385, the worst performance since October 2008. Asian shares extended gains from Wednesday.
‘Excessive Risk-Aversion’
“Markets have been unwinding excessive risk-aversion moves as the Brexit impact will only become clear over the long run,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank Ltd. in New York. “The yen may fall to around 104 to the dollar, but it remains to be seen whether the trend is sustainable.”
Financial institutions including Nomura Holdings Inc. and Citigroup Inc. have raised their year-end yen forecasts by as much as 20 percent after the U.K.’s referendum. The median of estimates compiled by Bloomberg has shifted 3.6 percent stronger this month, the most for year-end forecasts within any year since 2011, when the yen was on its way to a record high following the devastating earthquake and tsunami in March.
“The recovery in risk sentiment remains fragile because of all the uncertainties that lie ahead for the U.K. and EU, and that overhang will last for several months at least,” said Jason Wong, a currency strategist at Bank of New Zealand Ltd. in Wellington. “The yen is well-supported in times of uncertainty and can gain further on any big risk-off move.”
Source: Bloomberg
