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Yen Advances on Fresh Concerns Over U.K. Politics, Italian Banks

(July 4 11:03 PM EST) The yen rose, approaching its strongest level in more than two years against the dollar, as focus turned back to political uncertainty in the U.K. and worries over the health of Italian banks.

Japan's currency advanced against all 16 of its major peers as a gauge of Asian equities fell for the first time in five days, adding to demand for haven assets. One of the leading proponents for Brexit, Nigel Farage, quit on Monday as the leader of the U.K. Independence Party. Regulators are pressing Italian banks to clean up their balance sheets and build up buffers against losses after the British vote to leave the European Union exacerbated a selloff in the lenders.

"Markets are concerned about what's going on in the U.K. and there's more uncertainty about Italian banks," said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. "Those who wanted to exit don't have a game plan and they're leaving the stage. It just highlights the parlous state of political affairs that the U.K. risks descending into. There's a check on the market rally we saw last week."

Japan's currency climbed 0.4 percent to 102.12 yen per dollar at 11:59am in Tokyo, data complied by Bloomberg show. It was little changed yesterday and fell 0.3 percent last week. The yen reached 99.02 on June 24, the strongest level since November 2013. It gained 0.6 percent to 113.67 per euro.

The yen's appeal as a haven asset stems from Japan's current-account surplus, the broadest measure of trade flows.

Sterling fell 0.3 percent to $1.3251. It's the worst performing major currency this year with a loss of 10 percent.

Farage follows Prime Minister David Cameron as the second party leader to quit following the June 23 vote to unhitch the U.K. from the EU after more than four decades. Boris Johnson, the former London mayor who led the Leave campaign, said last week that he wouldn't seek to contest the Conservative Party leadership and replace Cameron.

Bloomberg (by Lilian Karunungan)





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