Dollar Posts Biggest Two-Day Gain Since 2011 on Brexit Fallout

  • Yen rallies against all 31 major peers after U.K. vote
  • Pound continues slump after reaching three-decade low

Fed Watches Closely as U.S. Dollar Gains Strength

The dollar rose in the biggest two-day advance since November 2011 as investors sought shelter from the U.K.’s shock decision to exit the European Union, which fanned turmoil across financial markets.

A gauge of the greenback climbed by 2.7 percent during the past two days as traders bought safe assets amid questions about the future of the U.K. economy and its broader impact on Europe. The yen rallied against all of its 31 major peers for the past two days by between 4 to 15 percent.

“The dollar is up because of safe-haven demand, and the yen as well,” said Georgette Boele, a currency strategist at ABN Amro Bank NV in Amsterdam. After the Brexit vote, “there are so many questions about how things will develop -- there’s still a lot of uncertainty, and of course, this is also an unprecedented event.”

The U.S. currency has pared first-half decline after the U.K. vote, which sent the pound tumbling to the lowest in three decades. The effects of the paralysis spreading through U.K. politics, and what it means for Europe, prompted investors to sell the pound and euro and seek safety in the dollar and yen.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, surged 0.9 percent as of 5 p.m. in New York. The greenback rose 0.8 percent to $1.1025 per euro and fell 0.2 percent to 102 yen.

Hedge funds and other money managers added to net-bullish bets on the dollar for the fourth week in five in before the Brexit vote, according to data from the U.S. Commodity Futures Trading Commission.

The dollar “will be supported by its role as a safe-haven currency amidst the uncertainty of the U.K. vote,” currency strategists including Joseph Capurso at Commonwealth Bank of Australia said in a note. “We anticipate currency volatility will remain elevated over the early part of this week as participants digest the implications.”

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