Yen Rises as U.S. Politics Collide With Brexit and Deutsche Bank

Updated on
  • Trump, Clinton deadlocked in Bloomberg poll before debate
  • Demand for havens builds as No. 1 German bank drops to record

The yen rose against all of the Group-of-10 currencies as Deutsche Bank AG sparked renewed concern about the health of Europe’s banking sector and investors sought safety before the first U.S. presidential debate between Hillary Clinton and Donald Trump.

Japan’s currency rose the most against the pound among the Group-of-10 currencies after more than three-quarters of chief executive officers in a KPMG survey said they’d consider moving operations outside the U.K. following the vote to leave the European Union. A Bloomberg Politics poll has Trump and Clinton deadlocked before the debate Monday, clouding the outlook for U.S. policy.

Japan’s currency is regarded as a haven because of the nation’s current-account surplus, and demand was also boosted as Deutsche Bank shares dropped to a record, with German Chancellor Angela Merkel reported to have ruled out state aid for its largest lender before elections in a year’s time. Speculation continues to mount that the BOJ is running out of policy ammunition as it seeks to spur inflation through unprecedented monetary easing.

“Foreign-exchange markets are getting off to a cautious start this week,” said Ned Rumpeltin, European head of currency strategy at Toronto-Dominion Bank in London. “Banks and Brexit newsflow keep European risks in the frame, while the U.S. presidential debate tonight is a key focus for investors.”

The yen advanced 0.7 percent to 100.33 per dollar as of 5 p.m. in New York, its first gain in three days. Japan’s currency added 0.6 percent against the pound.

Investors added to bullish yen positions versus developed-market currencies during the past week, according to BNP Paribas SA’s relative G-10 FX data that compare the current market with positions during the prior five years.

"The market flipped to a yen-long positioning at the start of the year as a hedge against risk-off," said Sam Lynton-Brown, a foreign-exchange strategist at BNP Paribas. A long position is a bet that an asset will increase in value.

The U.S. presidential candidates have clashed on a series of issues including trade, immigration and foreign policy. Clinton, a former Secretary of State in Barack Obama’s administration, is likely to offer more continuity with the current regime, while Trump, a real-estate developer and former TV personality, is a less conventional candidate, and has been a vocal critic of the current president.

"The market has been ignoring the U.S. election as a risk just as it had with Brexit vote," said Peter Rosenstreich, head of market strategy of Swissquote Bank SA. "But the combination of new elections polls and uncertainty of tonight’s debate has put the market on edge."