US Dollar falls as investors seek safety in yen over ‘Brexit’ polls
Frankfurt (Jun 1) The dollar fell against the yen on Wednesday as Japan’s currency drew demand for its relative safety after public polls showed a shift in favor of the so-called “Brexit” ahead of the closely watched referendum later this month.
Investors bought the Japanese currency after two U.K. polls, one a phone poll and one online, showed greater support for leaving the European Union rather than remaining, ahead of the June 23 referendum. The result could pose global economic uncertainty, prompting some investors to seek shelter in a haven currency such as the yen.
“Everybody has been talking about the pound’s plunge since earlier this morning,” said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow.
“Volatility (of the pound) will likely remain considerably high until the referendum,” said Sakai.
The U.S. dollar USDJPY, -1.34% was at ¥109.51, compared with ¥110.72 late Tuesday in New York. The greenback weakened to as low as ¥109.44.
The dollar also weakened against the euro, with euro-dollar EURUSD, +0.4043% fetching $1.1160 from $1.1130, while the U.K. pound GBPUSD, -0.2486% was at $1.4447 from $1.4482.
Read: Pounds slumps after new Brexit polls puts ‘leave’ vote ahead
The WSJ Dollar Index BUXX, -0.46% a measure of the dollar against a basket of major currencies, was down 0.22% at 87.71.
But investors largely found it “difficult to make moves” ahead of key events later this week which include the ISM manufacturing report and jobs data for May due Wednesday and Friday, respectively, said Sakai.
The dollar has gained momentum recently on increasing expectations that the Federal Reserve could raise short term rates soon. Fed Chairwoman Janet Yellen last Friday signaled the central bank will likely raise interest rates within months if the U.S. economy keeps gaining strength.
Nomura Securities chief FX strategist Yunosuke Ikeda said in a morning note that a quick decline in the odds of a rate increase at the Fed’s June meeting after a Brexit poll overnight was a bit excessive response. Ikeda said the FOMC members are focusing on the market impact rather than the event itself.
The Australian dollar climbed after data showed brisk growth in the resource-rich economy earlier in the session. GDP grew 1.1% in the first quarter from the fourth quarter of 2015 and 3.1% from a year earlier, compared with street forecasts of a 0.9% growth on quarter and a 3.0% annualized increase.
The Aussie AUDJPY, -0.79% rose to a fresh one-month high of ¥80.80 from ¥80.08. Against its U.S. peer, the Australian dollar AUDJPY, -0.79% gained to $0.7267 from $0.7232.
Source: Reuters
