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FOREX-Pound wobbly, yen rises on mounting Brexit worries

Published 14/06/2016, 04:20 pm
© Reuters.  FOREX-Pound wobbly, yen rises on mounting Brexit worries
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* Pound near 2-month low vs dollar, 3-year low vs yen

* Pound implied volatilities stay high ahead of June 23 vote (Updates prices, adds comments)

By Hideyuki Sano and Masayuki Kitano

TOKYO/SINGAPORE, June 14 (Reuters) - The British pound remained fragile near a two-month low against the dollar on Tuesday and the yen hovered near six-week highs against the U.S. currency on worries Britain may leave the European Union in a referendum less than 10 days away.

Some recent opinion polls have shown a lead for the "Leave" campaign, including a YouGov poll for The Times. many market players are sceptical about the polling, recent poll results do seem to suggest that the "Leave" camp has gained momentum, making investors nervous.

The British pound GBP=D4 fell 0.7 percent to $1.4161, having set a two-month low of $1.4117 on Monday.

"Although those opinion polls were not necessarily reliable in the case of Scotland's referendum on its independence, the markets have been swayed by them recently," said Hideki Kishida, fixed income analyst at Nomura Securities.

As investors readied for a plunge in the pound by buying pound put options, implied volatilities have soared, with one-month volatility GBP1MO= hitting an unprecedented level around 28 percent this week.

Against the yen, which tends to rise at times when risk appetite falls, partly because of Japan's net creditor status.

The pound fell 1.2 percent to 149.85 yen GBPJPY=R according to Thomson Reuters data, having fallen to around 149.50 yen on Monday.

The yen is the strongest among G10 currencies so far this month, and traded at 105.83 per dollar JPY= , near Monday's six-week high of 105.735 to the dollar.

A break of that level could lead to a test of its 18-month high of 105.55 set on May 3.

Japanese Finance Minister Taro Aso issued a fresh warning against renewed strength in the yen on Tuesday, saying that he would "firmly respond" if rapid and speculative moves persisted in the foreign exchange market. risk of yen-selling intervention by Japanese authorities is lending some support to the dollar against the yen, said Jack Siu, Hong Kong-based investment strategist for Credit Suisse (SIX:CSGN) Asia-Pacific.

"Tokyo has been very vocal in recent weeks against more yen strength," Siu said.

The Bank of Japan's policy meeting on June 15-16 is a near-term focal point for the yen. The prevailing market expectation is for the BOJ to hold off from any additional monetary easing, said a trader for a Japanese bank in Singapore.

The BOJ will probably stand pat, especially since the impact of any monetary easing at this point could be limited while the market is preoccupied by the Brexit risk, the trader said.

The yen stood near a three-year high against the euro, which slipped 0.5 percent to 119.39 yen. On Monday, the euro had touched a low of 119.005 yen EURJPY=R , a level last seen in February 2013.

Against the dollar, the euro eased 0.1 percent to $1.1279 EUR= , staying above Monday's low of $1.1233.

The euro is also vulnerable to threats of Brexit, which would hurt the euro zone economy and deal a serious blow to European integration.

At the same time, however, the currency could be helped by safe-haven flows as the euro is often used as a funding currency for bets in riskier assets.

Surprisingly soft U.S. employment data published earlier this month quashed expectations of a near-term rate hike by the U.S. Federal Reserve, underpinning the euro and other currencies against the dollar.

The Federal Reserve is set to meet on Tuesday and Wednesday, with market players waiting for clues about when the Fed might next look to move on rates. (Editing by Simon Cameron-Moore)

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