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FOREX-Pound wobbly, yen edges higher on mounting Brexit worries

Published 14/06/2016, 02:27 pm
© Reuters.  FOREX-Pound wobbly, yen edges higher on mounting Brexit worries
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* Pound near 2-month low vs dollar, 3-year low vs yen

* Pound implied volatilities soar 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.

Two recent opinion polls show a lead for the "Leave" campaign. While many market players are sceptical about the polling, recent poll results do seem to suggest a momentum for "Leave" campaign, market players said.

The British pound GBP=D4 fell 0.6 percent to $1.4185, edging back in the direction of a two-month low of $1.4117 that had been set 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 this week, with one-month volatility GBP1MO= hitting an unprecedented level around 28 percent.

Against the yen, which tends to rise at times when risk appetite falls, partly because of Japan's net creditor status, the pound fell 0.8 percent to 150.34 yen GBPJPY=R , having fallen to as low as 149.50 yen on Monday.

The yen is the strongest among G10 currencies so far this month, and traded at 106.02 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.

While 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.

"I think the mood in the market is to stay on guard in case they do something, but basically the view is that there won't be anything," he said, referring to the BOJ meeting.

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

The yen also stood near a three-year high against the euro, which slipped 0.3 percent to 119.68 yen after having fallen to 119.005 EURJPY=R on Monday, a level last seen in February 2013.

The euro held steady at EUR= $1.1291, having recovered from 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.

"Because of weak U.S. job data, the earliest the Fed can raise rates will be September," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ. (Editing by Simon Cameron-Moore)

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