Forthcoming referendum on the UK’s membership in the EU enhances tension and uncertainty in the financial market and increases demand for safe-haven assets.
Amid these factors Japanese Yen has reached three-year highs against the GBP and Euro and the level of October 2014 in the pair with the USD. The results of the latest polls in the UK show that more than half of the respondents are going to vote for the UK’s exit from the EU. In this case, it is hard to imagine the volume of financial flows between Japan and the UK or between Eurozone and Japan.
Japan is facing the problems of deflation and slowing down of economic growth and further strengthening in the Yen. The use of the Yen as a safe-haven asset is not favourable for the country. Last week the Deputy Governor of the Bank of Japan, Mr. Nakaso said that the deflation in Japan shall be defused with the help of soft monetary policy.
Today, Finance Minister of Japan Mr. Taro Aso said that Japanese government would prevent speculative growth of the Yen, thus, threatening intervention to the currency market. According to Aso, recent rise in the Yen was rapid and speculative. And if needed, Japanese monetary authorities would take tough measures.
The meetings of the US Fed, the Bank of Japan and Bank of England, which will be held this week, also enhance uncertainty in the market. The probability of the rate hike in the United States is very low, but investors will analyze comments of the Banks’ Chairman, Mrs. Janet Yellen trying to find some indications of the prospects of the interest rate increase.
The inaction of the Fed and the rise in the Yen may force the Bank of Japan to continue monetary policy easing at a meeting of the bank on Thursday. The pair USD / JPY has reached the annual and May lows at the level of 105.50, rapidly decreasing since February and the beginning of June.
Today/s news will include US data on retail sales and exports and imports prices for May. If the data is positive, the USD will grow in the market. However, the pair USD/JPY is in the downtrend, rapidly going to the key support level of 104.50.