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Pound Japanese Yen (GBP/JPY) Exchange Rate Falls, JPY Soars on Safe-Haven Demand

March 18, 2020 - Written by John Cameron

GBP/JPY Exchange Rate Fall as Investors Seek Japanese Yen Refuge

The Pound Japanese Yen (GBP/JPY) plummeted by 1% today as investors seek refuge in the safe-haven Japanese currency as Covid-19 fears wrack the global economy. The pairing currently trading around ¥128.75.

Japanese Yen (JPY) investors are awaiting further developments over a stimulus package for the Japanese economy.

The nation’s Prime Minister Shinzo Abe is due to partake in a panel of key economic ministers alongside the Bank of Japan’s Governor, Haruhiko Kurdoa, to discuss measures to alleviate Covid-19’s impact on the economy.

With concerns growing that Japan’s economy could see a recession in the near-term, investors are remaining wary of the Japanese Yen and flocking to the safe havens of the US Dollar and Swiss Franc instead.

Waqas Adenwala, Asia analyst at The Economist Intelligence Unit, also commented that the 2020 Japanese Summer Olympics is the only economic ‘silver lining Japan has right now’.
Mr Adenwala added:

‘The Olympics is the only scenario we can expect some incoming of tourist arrivals, some spending there. It wouldn’t have been a big lifesaver, but it would’ve been some sort of support rather than nothing being there.’

Pound to Japanese Yen Exchange Rate Sinks as UK Economic Fears Rise

The Pound (GBP) traded in a narrow range after yesterday saw the UK Government announce a £350bn stimulus support package to aid the British economy throughout the coronavirus pandemic.

Prime Minister Boris Johnson echoed Chancellor Rishi Sunak’s statement, saying that Downing Street would do ‘whatever it takes to support the economy’.

Mr Johnson also said, ‘This a time to be bold, to have courage. We will support jobs, we will support incomes, we will support businesses ... We will do whatever it takes.’

However, some analysts believe the Pound (GBP) is yet to see lows that were only envisaged arriving from a ‘hard Brexit’.

Sterling is expected to face further volatility as the Government is now expected to replicate the European Union and lock down its borders to abate the spread of the coronavirus.

Richard Benson, the Co-Chief Investment Officer at Millennium Global Investments, comments:

‘Everyone thought that Brexit was the big deal for Sterling this year but …the currency has been completely overwhelmed by the coronavirus.’

Pound Japanese Yen Outlook: UK Coronavirus Response in Focus

The Japanese Yen (JPY) looks set to hold onto its gains while the ongoing coronavirus crisis continues to unfold. However, any signs of a returning stability to global markets would lower risk-aversion and see JPY shed some of its gains against the Pound.

Sterling is likely to remain under pressure this week as markets eye the British Government’s response to Covid-19.

Silvia Dall’Angelo, a Senior Economist at Hermes Investment Management, London, commented that Sterling is ‘out of favour’ due to the UK being at ‘odds with the responses we’ve seen in other European countries’. Consequently, we could see the GBP/JPY exchange rate continue to dip.

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