British Pound to Yen Exchange Rate (GBP/JPY) Steady, Pound to Swiss Franc Edges Higher

August 12, 2014 - Written by David Woodsmith

STORY LINK British Pound to Yen Exchange Rate (GBP/JPY) Steady, Pound to Swiss Franc Edges Higher

The UK Pound to Yen exchange rate (GBP/JPY) managed to tick higher on Tuesday after domestic Japanese data and concerns over Ukraine eased.

According to Japan’s Ministry of Economy, Trade and Industry, industrial production in the world’s third largest economy fell to a seasonally adjusted figure of -3.4% in June from the figure recorded in July. The decline was more than forecasted by economists who had been expecting a figure of -3.3%. The drop is a steep fall from May’s figure of 0.7%.

On a yearly basis, industrial production increased by 3.1%, below expectations for a figure of 3.2% and was better than the previous figure of 1.0%.

An easing in geopolitical concerns saw the Japanese Yen lose support from demand for safe haven assets and allowed the Pound and other major peers such as the US Dollar make gains. The Swiss Franc also declined most of its most traded peers on Tuesday because of softening risk aversion.

The US Dollar was able to advance to its best level in 7-months against the Franc.

Despite the slight softening in safe haven demand, investors are continuing to keep a wary eye on events in the Middle East and Ukraine.

Risk sentiment was hit after Iraq on Monday named Haidar al-Abadi as the new prime minister to end the eight-year rule of Nuri al-Maliki, but Maliki has refused to go and deployed Special Forces in Baghdad. In Ukraine, a Russian convoy of 280 trucks carrying humanitarian aid set off on Tuesday amid Western warnings against using help as a pretext for an invasion.

The Japanese Yen is likely to fall further if risk aversion softens further. With a stagnating and struggling economy Japan has little reason for the Yen to make gains.

“There’s no real reason why the Yen should be strong apart from risk aversion. I think it is just a little bit of an unwind of the risk off selloff that we saw last week. The weakness in the yen is the same reason why you have seen a pickup in the stock market.” After recovering, last week’s losses due to a slight easing of geopolitical pressure in the Middle East and Ukraine the greenback has remained in a positive trend against the Japanese currency,’ said Thomas Averill, a managing director at Rochford Capital.

Due to the summer holiday period the Japanese Yen is also feeling the effects of weakened domestic market demand.

"We're in summer vacation season, and there aren't that many market participants in Japan," Kengo Suzuki, chief forex strategist at Mizuho Securities told Dow Jones newswires. "And with a lack of major indicators, investors will remain cautious of geopolitical risks and will be watching share price movements for cues."

The Yen could see some volatility on Wednesday due to the release of Bank of Japan GDP estimates. Economists are forecasting that the data will show a steep contraction of GDP as a result of the introduction of a retail sales tax hike earlier in the year.

Sterling meanwhile is likely to experience movement from the release of eagerly awaited UK wage growth, unemployment and inflation data.

Swiss Franc exchange rate outlook

The Pound to Swiss Franc exchange rate (GBP/CHF) strengthened on Wednesday as investors awaited the release of eagerly awaited UK inflation, unemployment and wage growth data.

The Franc meanwhile was softened after economists warned that the nation’s exporters were struggling as the currencies high value was making Swiss made products less attractive to consumers.

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: American Dollar Forecasts Currency Predictions Daily Curre Forecasts