Yen Halts Drop, Showing Safety Still in Demand as Pound Rallies

  • Sterling builds on its 0.9 percent advance from Tuesday
  • Global currency volatility at lowest since June 23 U.K. vote

The yen halted its decline from Tuesday, showing that it’s still in demand for its perceived safety following the U.K.’s vote to leave the European Union.

“Investor sentiment will not immediately turn risk-positive,” said Takuya Kanda, a senior researcher at Research Institute Ltd. “We are nowhere near declaring an end to the shock.”

The pound extended its rally amid optimism European authorities will act to stabilize markets. It rose even as almost three quarters of respondents to a Bloomberg survey predicted Britain’s economy will slip into a recession for the first time since 2009.

Japan’s currency strengthened 0.1 percent to 102.66 per dollar as of 7:10 a.m. in New York. Sterling rose 0.7 percent to $1.3437, a day after climbing 0.9 percent. Britain’s currency is still down 9 percent since Britons went to the polls June 23 to decide on their future relationship with the rest of Europe. The euro advanced 0.3 percent to $1.1093.

JPMorgan Chase & Co.’s index of global currency volatility was at 11.4 percent, the lowest since the day of the U.K. vote. Japan’s Prime Minister Shinzo Abe said Finance Minister Taro Aso should watch markets closely and work with Group-of-Seven members to take financial steps as needed.

Traders are now pricing in a 12 percent chance of a U.S. interest-rate cut by year-end compared with a 9 percent probability of an increase, fed fund futures indicate. A boost to borrowing costs isn’t now foreseen until 2018.

In Asia, South Korea’s won gained 1 percent to 1,160.04 per dollar, advancing for a second day as local stocks extended a rebound. The government said it would boost spending to cushion the impact of the U.K.’s historic vote.

New Zealand’s dollar jumped 1.1 percent to 71.24 U.S. cents, while the neighboring Aussie climbed 0.8 percent to 74.43 cents.

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