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FOREX-Sterling rallies as polls favour Britain remaining in EU, yen sags

Published 20/06/2016, 01:00 pm
© Reuters.  FOREX-Sterling rallies as polls favour Britain remaining in EU, yen sags
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* Sterling broadly firmer, while perceived safe-haven yen tumbles

* Britain's EU referendum on Thursday looms large

* Opinion polls show the 'Remain' camp regaining some momentum

* Dollar index pressured by rebounding euro

By Lisa Twaronite and Ian Chua

TOKYO/SYDNEY, June 20 (Reuters) - Sterling rallied on Monday as opinion polls swung in favour of British voters opting to remain in the European Union at this week's referendum, underpinning risk sentiment and sending the perceived safe-haven yen tumbling.

The pound climbed 1.6 percent to $1.4589 GBP=D4 , extending a recovery from last Thursday's more than two-month trough of $1.4013.

It jumped more than 2 percent to 152.65 yen GBPJPY=R , pulling well away from a three-year trough around 145.34 set on Thursday.

Investors took heart after three of six opinion polls published over the weekend showed a shift towards keeping Britain in the EU, but the June 23 vote still looked too close to call. poll findings will resonate today, likely seeing further advances for sterling, some renewed weakening in the yen and a firmer Australian dollar," said Ray Attrill, global co-head of FX strategy at National Australia Bank.

Even before the latest polls, data from the Commodity Futures Trading Commission released on Friday showed that currency speculators reduced their net short positions against sterling in the latest week, from a three-year high in the previous week. The pound still declined by around 3 percent against the dollar during the June 7-14 timeframe. IMM/FX

Indicating a general pick-up in risk appetite, U.S. stock futures ESc1 rose more than 1 percent, suggesting a positive open on Wall Street later in the day. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 1 percent, and Japan's Nikkei stock index .N225 soared 2.2 percent.

As a result, the yen dipped across the board - a move that may help ease some worries about the currency's strength.

On Friday, Finance Minister Taro Aso said he was deeply concerned about "one-sided, rapid and speculative" currency moves and would respond urgently if needed - a hint at possible yen-selling market intervention. some analysts warned there is little conviction in markets and moves could easily reverse if sentiment turned negative.

"I don't think these moves are sustainable because nobody can forecast what will happen," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Last week's murder of pro-EU lawmaker Jo Cox appears to have tipped some polls toward the "Remain" camp, though earlier polls showed the electorate is narrowly divided. Cox's death might have been some kind of a game-changer, but maybe not. I think speculators will continue, selling the pound and buying yen, based on polls," he said. "This is a just a rebound today, and not based on any fundamentals."

Earlier on Monday, Japanese trade data showed that the country's exports fell at the fastest pace in four months in May on supply chain disruptions from the Kumamoto earthquake and slow growth in emerging markets. dollar climbed 0.5 percent to 104.66 yen JPY= , moving away from Thursday's nearly two-year low of 103.55 hit after the Bank of Japan held policy steady and disappointed investors hoping for more stimulus.

The euro jumped 1.3 percent to 118.87 yen EURJPY=R , well above Thursday's three-year low of 115.51.

Against the greenback, the common currency gained 0.7 percent to $1.1358 EUR= , helping to push down the dollar index .DXY 0.7 percent to 93.593.

But looming over the euro's upside, Germany's constitutional court will rule on Tuesday on the emergency bond-buying plan devised by the European Central Bank during the financial crisis.

While an outright rejection of the programme is viewed as unlikely after a largely favourable verdict by the European Court of Justice last year, the court could potentially upset the ECB's current money-printing programme and lead to market turmoil. Australian dollar, usually sold off in times of heightened risk aversion, gained 0.6 percent to $0.7439 AUD=D4 . It rose 1.1 percent on the yen to 77.86 AUDJPY=R .

Ahead of the "Brexit" vote, Federal Reserve Chair Janet Yellen will appear before lawmakers in the U.S. House of Representatives on Wednesday to discuss monetary policy and the state of the economy.

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