Currency News

Daily Exchange Rate Forecasts & Currency News

Pound Japanese Yen Exchange Rate Crashes after Carney Comments

June 30, 2016 - Written by John Cameron

The Pound has tanked lately after BoE Governor Mark Carney indicated that a rate cut would likely be incoming.

GBP JPY Exchange Rate Recovered Some of its Losses on Reduced Safe-Haven Demand



After enjoying pre-Brexit highs around the 159.49 mark, the Pound Japanese Yen exchange rate tanked to around 136.18 and has struggled to recover until yesterday, when we saw a 1.21% rally for Sterling against the Yen.

Naturally, the Pound haemorrhaged losses on the announcement of the result of the EU referendum and while it has managed to marginally recoup some of its losses, the rate remains almost 20 Yen down compared to last week.

The abatement of safe-haven demand has forced some downward pressure on the Yen, as did a massive bout of investor profit-snatching that occurred earlier in the week.

Currently the Pound to Japanese Yen exchange rate trades at 138.87, a hearty two Yen stronger than immediately after the news that a Brexit will be occurring.

Strengthening Yen (JPY) Panics Bank of Japan (BoJ) and Japanese Government



The Yen has enjoyed a great deal of safe-haven demand since the referendum’s results were released on Friday but this has panicked the Bank of Japan as the already over-valued Yen has led to lessening profits for Japanese corporations as they earn most of their money overseas.

Advertisement
Japan currently has a negative interest rate, set at -0.10%, and many analysts have already posited that the Bank of Japan has little else to offer to stem or even reverse the Yen’s rally.

The overvalued Yen has been an issue for the Japanese government for a long time now and further rises could see the Government directly intervening within the market, even though it is frowned upon.

Toshihiro Nagahama, chief economist at the Dai-Ichi Life Research Institute gave this useful insight into the Japanese economies near future if the outlook does not brighten:

‘Prices will surely weaken as import costs fall. Earnings are set to drop, which may cause the demand-supply balance of the labour market to worsen. Deflation could take root once again if the yen is allowed to keep appreciating’.

If the markets are left to themselves then it is more than possible that the Yen will continue to rise and Japanese stocks could see a dip.

Sterling Still Reeling from ‘Brexit’ Results but Market Conditions Seem to Improve



The Pound has finally seen its first rally since last Thursday’s fateful referendum on the UK’s future within the European Union.

Immediately following the confirmed news of a Brexit, the Pound posted its worst ever single-day slide as markets were highly reactionary. The Pound saw depreciation as bad as 10% in some pairings and was hovering around the -5% mark against most of the majors by the end of Friday.

Investors with short options on the Pound cashed out earlier in the week as they rebought their borrowed assets at a much lower price, sensing that the Pound would not drop much further, enough investors chose to lock in their profits that the Pound saw a healthy rally.

Both mainstream UK political parties are still embroiled in a leadership battle with marginal progress made by the Conservative party as Stephen Crabb, the man who succeeded Ian Duncan Smith as secretary of state for work and pensions, formally announced his plans to run for leadership.

It is uncertain how Crabb will fare as the relatively unknown lawmaker will be assumed to be going up against better-known public figures like Boris Johnson and Theresa May.

Future Looks Brighter for Pound as Uncertainty Slowly Begins to Clear



It would be frivolous to talk about any domestic UK market prints or ecostats as it has been firmly established that the Pound has all but decoupled from the data during the battle of the Brexit.

However we could expect to see some increase in support for the Pound once the political situation calms down and we can figure out who is going to run the country. Once the dust settles from the referendum, ecostats will begin to have an effect once more but until then the Pound is at the mercy of economic sentiment.

With the current economic climate, the Bank of Japan will be looking at further measures to weaken the Yen, such as greater quantitative easing or even full scale restructuring. For Japanese exporters to ‘break even’ the Yen must remain below 103.2 versus the US Dollar so if we see the Yen stray over that line then the Japanese government will seriously consider direct action.

As the post-Brexit landscape clears, we should see further GBP/JPY shifts.


Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.


TAGS: Japanese Yen Forecasts Pound Sterling Forecasts

Comments are currrently disabled