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Pound to Yen Exchange Rate Today (GBP/JPY) Firms as Japanese Government Pension Investment Fund Weighs

August 7, 2014 - Written by David Woodsmith

The Pound to Yen exchange rate fell sharply on Friday as the Asian currency was boosted by demand for safe haven assets. Geopolitical concerns heightened after the United States declared that it would launch airstrikes against Islamist Jihadist fighters threatening Iraq. The move raised fears that the conflict could escalate further. Tensions between the West and Russia are also supporting safe haven assets. The currency GBP/JPY rate is 171.15622.

The Pound Yen pairing firmed on Thursday after coming under pressure from the news that the Japanese Government Pension Investment Fund intends to increase the amount of funds allocated up to 20% of its funds to domestic equities.

A report, which showed a decline in stock investment by foreigners in Japan, also weighed upon the strength of the Asian currency. The amount of cash invested from overseas dropped more than economist expectations.

According to the Japanese Ministry of Finance, stock investment by foreigners in Japan, the world’s third largest economy, decreased to 94.9 billion Yen in the week ending on August 2nd. The figure was a sharp fall from the previous week’s figure of 203.3 billion Yen.

Foreign Stock Investment in Japan averaged 71.68 JPY Billion from 2005 until 2014, reaching an all time high of 1568.80 JPY Billion in April of 2013 and a record low of -1092.30 JPY Billion in March of 2014.

Losses for the Japanese Yen are likely to be restrained as geopolitical tensions continue to increase which will therefore cause investors to find shelter in safe haven currencies.

Tensions over the Ukrainian situation heightened earlier in the week after it was reported that Russia had deployed around 20,000 combat troops and military equipment to the Eastern Ukrainian border. Heavy fighting between Kiev loyal troop and pro-Russian separatists has escalated as the government forces prepare to launch an assault on the final pieces of territory still under rebel control.

The city of Donestk was hit by air strikes overnight, the first such action seen since May when government forces launched a bombardment of the city’s airport.
Oana Lungescu, a Nato spokesman, said on Wednesday: “We’re not going to guess what’s on Russia’s mind, but we can see what Russia is doing on the ground – and that is of great concern. Russia has amassed around 20,000 combat-ready troops on Ukraine’s eastern border. Moscow could use “the pretext of a humanitarian or peace-keeping mission as an excuse to send troops into eastern Ukraine”.

On Thursday, tensions rose further after Russia hit back at sanctions imposed upon it by the West. Russian Prime Minister Dmitry Medvedev said that the nation was imposing a full scale embargo on food imports from the European Union and other countries including, Norway, Australia and Canada. Russia also announced that it would be banning all Ukrainian airline flights, which cross its territory.

“When you see the build-up of these troops, the sophistication and training of these troops, the heavy military equipment that’s being put on the border, of course it’s a reality and it’s a possibility,” Hagel told reporters at the headquarters of the U.S. European Command in Stuttgart, Germany.

The Yen could also find support from jittery investors ahead of the European Central Bank and Bank of England monetary policy meetings. The BoE is widely expected to leave interest rates at the record low level of 0.5%. The ECB meanwhile could introduce new measures in order to tackle the threat of deflation taking root in the Eurozone and in an effort to kick-start the regions flagging economic recovery.

The Yen is likely to experience volatility on Friday as the Bank of Japan is set to announce its latest interest rate decision. Investors widely expect the Bank to leave rates at 0%.
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