Currency Swings Drop as Traders Seek Brexit Clues at BOE Meeting

  • JPMorgan's volatility gauge set to fourth weekly drop in five
  • Yen slumps on speculation of further monetary easing by BOJ

Gyrations in the $5.3-trillion-a-day currency market waned as traders await the outcome of the Bank of England’s policy meeting Thursday in the run-up to the U.K.’s referendum on its European Union membership.

JPMorgan Chase & Co.’s global currency volatility measure fell to 11 percent in New York, poised to drop for the fourth week in five, before Group-of-Seven leaders meet in Japan toward the end of this month. Brexit is dominating the U.K. agenda and the BOE is set to update its take on how the vote is affecting the economy. All economists in a Bloomberg survey predict the central bank will keep its key rate at 0.5 percent. The yen slumped on speculation of further easing by the Bank of Japan as soon as next month.

“Markets are waiting for fresh factors to trade on,” said Yuji Saito, head of the foreign-exchange department at Credit Agricole SA in Tokyo. “The next focus is G7, Brexit risks in June, so markets are likely to take to the sidelines.”

Sterling fetched $1.4433 at 6:54 a.m. in London, compared with $1.4448 Wednesday. The currency touched a seven-year low of $1.3836 in February. The euro was little changed at $1.1419. Its one-month implied volatility fell for a fifth day to 7.77 percent, set for the lowest closing level this month, from 9.23 percent a week ago.

The yen fell 0.4 percent to 108.88 per dollar from Wednesday, when it strengthened 0.8 percent. Its gauge of one-month implied volatility fell to 10.13 percent Thursday, from 11.49 percent a week ago.

Easing Possible

The BOJ could ease in June or July if inflation indicators weaken and stock prices drop, Takatoshi Ito, a professor at Columbia University, said in an interview with Reuters. He was a deputy to central bank chief Haruhiko Kuroda at the Ministry of Finance in 1999 and 2000. The report contributed to the yen’s drop, said Saito at Credit Agricole.

Australia’s dollar slumped 0.6 percent to 73.33 U.S. cents as falling Asian stocks damped demand for riskier assets. The Aussie had gained 0.8 percent over the last two days as oil prices rallied.

The currency’s declines will be limited by investor appetite for higher-yielding AAA-rated assets, keeping the Aussie in a range, said Takuya Kanda, a senior researcher at Research Institute Ltd.

“While commodities prices like oil are showing signs of stabilizing, stocks are vulnerable and there is little clarity on risk sentiment,” Kanda said. “There is also speculation for further rate cuts in Australia so it’s difficult to buy up the currency.”

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