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Best Pound Sterling to Yen exchange rate for One Month as Scottish No Vote Ahead

September 11, 2014 - Written by Frank Davies

The Pound advanced to a 1-month high against the Japanese Yen after a poll released late on Wednesday showed that support for Scotland remaining a part of the United Kingdom increased to 53%, beating the 48% in favour of splitting the UK.

The poll countered a You Gov poll released on Sunday, which showed that 51% were in favour. The new poll eased concerns and saw the Pound rally against the majority of its most traded peers.
In addition, offering support to the UK currency was a number of warnings from leading UK businesses and politicians. Warnings over the potential economic consequences to Scotland if it chooses to leave could back the cause for a No vote. Scottish-based Lloyds Banking Group and Royal Bank of Scotland both said that they would relocate to England.

Bank of England Governor Mark Carney warned that a currency union between a independent Scotland and the rest of the UK would be highly unlikely as it would be ‘incompatible with sovereignty’ and that Scotland would need billions in reserve for it to viable.

‘There seems to be a lot more understanding in Scotland right now as to what independence would mean for the currency. That realisation has definitely been picked up by the Scottish media and has quelled the financial markets panic somewhat, and that’s why I think Sterling has gone up today,’ said Adam Myers, head of European currency strategy at Credit Agricole.

The Japanese Yen meanwhile remains at multi year lows against the US Dollar and is weaker against all of its most traded peers as the Bank of Japan chose to maintain its ultra-loose monetary easing policy going until it meets its inflation target of 2%.

A weakening of the Yen has aided the nation’s exporters and has led to them seeing a rise in profits as their goods become more appealing to overseas markets.

"There are positive and negative factors coming from the weaker yen, but I would say the achievement of the 2 percent inflation target should be a prioritized, as deflation has been the worst issue for the Japanese economy over the past 17 years. The weaker yen will increase import costs from overseas, and will damage the earning status of Japanese importers,’ said the chief economist at RBS Securities.

Sterling is forecast to stay higher against the Yen until the weekend, however the currency does remain vulnerable ahead of the Scottish independence vote due to be held on September 18.
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