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Forex - Yen surges on safe-haven demand, pound off 30-year lows

Published 06/24/2016, 04:58 AM
Updated 06/24/2016, 04:58 AM
© Reuters.  Safe-haven demand pushes yen higher; pound, euro under broad selling pressure

© Reuters. Safe-haven demand pushes yen higher; pound, euro under broad selling pressure

Investing.com - The yen rallied to more than two-and-a-half year highs against the dollar on Friday, while the pound pulled back from 30-year lows and the euro bounced off an earlier four-month trough after the U.K. surprise decision to leave the European Union rattled financial markets around the globe.

USD/JPY hit 99.03 overnight, the lowest since November 2013, before paring losses and settling at 102.83 in European morning trade, still down 3.15%. GBP/JPY was down 9.34% at 143.25, after hitting three-and-a-half year a low of 133.30 earlier in the day.

Demand for the safe-haven yen was boosted after the U.K. voted by a substantial margin to leave the EU in a landmark referendum, with the Leave side winning 52% of the vote, against 48% to remain.

The Bank of England said Friday it would take all necessary steps to secure monetary and financial stability after the shock Brexit result.

"The Bank of England is monitoring developments closely," it said in a statement.

"It has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks."

Shortly after the Brexit news, David Cameron said he will be standing down as U.K. Prime Minister.

Cameron confirmed he will honour Britain's historic vote to leave the European Union and that he will resign before his Conservative Party's conference in October.

Japanese Finance Minister Taro Aso said Friday that Tokyo will respond as needed to "extremely nervous" exchange-rate moves, as the referendum result roiled markets.

The Brexit vote pushed sterling down to a 30-year low of 1.3231 against the greenback earlier Friday. GBP/USD was still down 6.46% in European morning trade at 1.3922.

Meanwhile, EUR/USD tumbled 1.91% to trade at 1.1166, off a four-month trough of 1.0913 hit overnight, while EUR/GBP surged 4.59% to a a more than two-year high of 0.8316 before pulling back to 0.8002.

Markets shrugged off data released earlier Friday showing that the German Ifo business climate index rose to 108.7 in June from 107.8 in May, whose figure was revised from a previously estimated 107.7.

Analysts had expected the index to hit 107.5 this month.

The Swiss franc moved lower against the dollar, with USD/CHF up 1.62% at 1.3003 after the Swiss National Bank confirmed it was intervening in the foreign exchange market to weaken the currency. EUR/CHF was down 0.40% at 1.0865, off an earlier 11-month low of 1.0622.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 2.07% at 95.26, after climbing to three-month high of 96.70 earlier Friday.

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