With the approaching of the date of referendum in the UK, tension in the financial markets is increasing. Representatives of the large world banks have already suggested measures to stabilize situation after the exit of the UK from the EU, provided that large-scale redistribution of the funds will occur in the world. In case of the exit of the UK from the EU, the Pound and Euro will sharply go down, while safe-haven assets, such as the Yen and Swiss Franc, will rapidly go up
It is obvious that the large banks and IMF discuss possible consequences from the exit of the UK form the EU. Japanese Finance Minister Taro Aso said today that the government would not carry out intervention to the currency market without special reasons, which contradicted to his previous statements. Lately, the Yen has strengthened significantly. The increased verbal interventions undertaken by the monetary authorities of Japan, boosted expectations of interventions to the currency market by the Bank of Japan in order to lower the price of the Yen.
Statement made by Aso, which contradicted to his previous statements, was made after the authorities of the U.S. in and Europe openly asked Tokyo to allow the market to determine the price of the Yen. In his Monday’s report, International Monetary Fund also opposed the direct intervention into the currency market by the Bank of Japan. IMF also said that the rate of the Yen was consistent with economic conditions, despite recent growth.
After the statement made today by Taro Aso, the pair USD/JPY pair briefly fell again to the annual and monthly lows at the level of 103.55. However, later during the Asian session, and at the opening of the European session, the pair USD/JPY has moved into positive territory and growth of the pair continues.
Latest polls results, which showed the increased number of people who are going to vote for staying in the EU, helps the recovery in the Pound and global stock markets, causing also the rise in the Japanese stock market and in the pair USD/JPY. Japanese stock index Nikkei Stock Average rose by 1.3% at the closing of the Asian session, the pair USD/JPY is trying to reach resistance levels of 104.85 and 105.00.
However, until the announcement of the referendum results on Friday (04:00 GMT 2), we expect that volatility in the market will be high and may change in either direction.