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GBP to JPY Exchange Rate Tumbling from Yearly Best as Yen Mounts Broad Recovery

February 9, 2021 - Written by Tim Boyer

Despite new fiscal stimulus packages being announced for Japan, the safe haven Japanese Yen continues to climb today and the British Pound to Japanese Yen (GBP/JPY) exchange rate is tumbling. Investors are selling the Pound amid fresh uncertainties over Britain’s coronavirus and Brexit outlooks, and the Yen is benefitting largely from weakness in major rivals like the US Dollar.

After opening last week at the level of 143.50, GBP/JPY slipped lower before surging higher in the second half of the week on Bank of England (BoE) developments. GBP/JPY ultimately closed last week much higher, at the level of 144.76.

Then when markets opened this week, GBP/JPY briefly touched on a new high of 144.91. This was the best level for GBP/JPY in over a year, since the end of 2019.

However, since touching that yearly high yesterday, GBP/JPY has been tumbling again.

At the time of writing on Tuesday, GBP/JPY is trending near the level of 144.14, having lost around half a Yen from the week’s opening levels.

GBP Exchange Rates Avoid Bigger Losses Thanks to Optimism over UK Vaccination Drive

The Pound has been one of the most major appealing currencies in recent weeks. Investors have been buying the Pound en masse amid rising optimism that Britain’s coronavirus vaccination programmes are head of those of other major economies.

With 18% of Britain’s population having received their first vaccination doses already, analysts are still optimistic about Britain’s vaccine outlook.

This is despite reports that some vaccines are not as effective against some newer coronavirus variants.

According to Yohay Elam, Analyst at FXStreet, a combination of vaccination hopes and Bank of England (BoE) optimism keep the Pound appealing overall:

‘The Pound is well-positioned to take advantage of the Dollar's descent, thanks to Britain's vaccination drive. The UK has already jabbed around 18% of its population and is on course to hit the government's goal of reaching around 15 million people by February 15.

The Bank of England's optimism is another positive factor for the Pound. The UK releases growth figures next week, and they expectations for robust figures are supporting Sterling.’

Despite this though, the Pound has been unable to hold its ground against the rebounding Japanese Yen. The Pound’s appeal is being dampened by some recent vaccine uncertainty as well as tensions between UK and EU officials over post-Brexit trade obstacles.

JPY Exchange Rates Climbing despite Lower Safe Haven Demand

The Japanese Yen is a safe haven currency. If often benefits in times of global market uncertainty.

However, in recent weeks it has been struggling to benefit from safe haven demand much, due to a surge in demand for its biggest rival the US Dollar (USD).

The Yen often weakens in times of US Dollar strength. This as well as the Pound’s recent rebound rally are among the reasons the Japanese Yen plunged last week.

However, investors are buying the Japanese Yen again this week so far.

This is largely due to fresh weakness in the US Dollar. The US Dollar is plunging from its best levels as investors reassess optimism over US fiscal policy, and this is helping the Yen to rebound strongly.

On top of this, markets are becoming more optimistic about Japan’s coronavirus situation as the nation’s state of emergency finally starts to have an effect.

According to Kyodo News in Japan:

‘Tokyo confirmed 276 new coronavirus cases Monday, marking the lowest daily infections in more than two months under an extended state of emergency in the capital and other areas,’

GBP/JPY Exchange Rate Forecast: Quiet Economic Calendar Leaves Pandemic as Focus

The Pound to Japanese Yen exchange rate is likely to be driven by developments in market sentiment and the coronavirus pandemic over the coming sessions.

A lack of notable UK or Japanese data for most of the week will leave the GBP/JPY driven mostly by other factors.

If the UK coronavirus situation improves, the Pound is more likely to hold its ground against the Yen. However, market risk-aversion or continued weakness in the US Dollar could mean more strength for the Japanese Yen instead.

Tomorrow, Pound movement could also be influenced by an upcoming speech from Bank of England (BoE) Governor Andrew Bailey.

Friday’s session will be the most influential of the week for UK and Japanese data though. Japanese foreign bond investment data will be published, and UK production and growth results could also influence the Pound to Japanese Yen exchange rate.
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