The yen extended its gains on Tuesday as uncertainty over key upcoming risk events continued to attract flows to safe havens. The yen’s strength prompted Japan’s finance minister to again issue a fresh warning to the markets against speculative moves, saying that the government will respond “firmly” if necessary.
Further supporting the Japanese currency today was an upward revision to April’s industrial output. Industrial production was revised up from the preliminary estimate of 0.3% month-on-month to 0.5% in the final reading for April.
The greenback hit a 6-week low of 105.62 yen in late Asian session as risk-off trading intensified ahead of the FOMC meeting which starts later today. The Fed will announce its decision on Wednesday and will be followed by the Bank of Japan’s decision on Thursday. Although neither central bank is expected to announce any changes ahead of next week’s EU referendum in the UK, traders will closely watch for any signs on future policy as the Fed is likely to raise rates in the coming months, while the strong yen is putting increasing pressure on the Bank of Japan to loosen policy.
The euro and the pound both slid against the yen with the euro trading just a notch above yesterday’s 3¼-year low at 119 yen, while sterling touched a fresh near three-year low of 149.18 yen.
Sterling reversed yesterday’s brief rebound after two new polls put support for Britain to leave the EU in the lead with just 10 days to go till the referendum. The pound fell back towards two-month lows against the dollar at 1.4127 in late Asian trading today, while the euro climbed to 0.7967 pounds.
The dollar rose against the euro as rising risks of a Brexit also hit sentiment for the single currency. The euro was down at 1.1254 dollars, having risen above the 1.13 level yesterday.
The growing uncertainty over the Brexit vote and central bank policy, as well as about the health of the global economy weighed on crude oil prices on Tuesday. US crude oil futures were down 1.4% in late Asian session today at $48.22 a barrel.
Commodity currencies such as the Canadian, Australian and New Zealand dollars fell back in Asian trading as a result. The aussie had started the day firmer and rose to 0.7404 versus the greenback following broadly positive business confidence survey results from the National Australia Bank. However, it slipped to 0.7365 in late session as commodity prices weakened.
Gold prices also headed lower on Tuesday as the yellow metal took a pause from its week-long rally. Gold was last down around 0.4% at $1278.90 an ounce.
Coming up later today, UK inflation and Eurozone industrial production figures will be eyed in the European session, while in the US session, US retail sales will be watched closely ahead of the FOMC’s rate decision tomorrow.
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