Some risk appetite crept back into the currency markets on Friday and demand for safe havens faded slightly. The yen gave back some gains after reaching its strongest level against the dollar in nearly two years on Thursday. Gold fell back below the key $1,300 level.
The British pound and the euro have recouped some losses today after having been hit hard this week by Brexit concerns and general risk aversion in the markets following the Federal Reserve and Bank of Japan policy meetings which resulted in no action taken by both banks.
Brexit concerns appeared to be put aside and there was some re-positioning and profit taking ahead of the weekend. A factor behind this was news of the death of a British MP, Jo Cox, who was killed on Thursday after campaigning in her constituency. This has resulted in the suspension of campaigning for both sides. Some believe this news might boost the “remain camp”.
Sterling moved off 2-month lows against the dollar after the news yesterday, rising from $1.4011 to reach a high of $1.4293 in the Asian session today.
The bounce in the pound helped lift the euro as well, as the single currency rose to $1.1271 after having fallen to a 2-week low of $1.1130 yesterday.
The dollar regained the 104 yen handle today after making a recovery from a 22-month low of 103.53 touched yesterday when the Japanese currency rallied on the news that the Bank of Japan kept monetary policy on hold. The greenback bounced to a high of 104.82 in Asia today before steadying around 104.30 yen.
The euro recovered from a 3-year low versus the yen and rose above the key 117 yen level to briefly test the 118 level before stabilizing just above 117 yen by late Asian session.
The Australian dollar also benefitted from the slight easing in risk aversion today, as it bounced from sub-$0.73 levels to reach a high of $0.7403.
Gold reversed almost all of this week’s gains and fell to a low of $1,276.30 an ounce. Yesterday the precious metal hit a high of $1,315.47, its highest level since August 2014.
The economic calendar is light today, with little tier one data that would have a large impact on currencies. Out of the US, building permits and housing starts data could attract some attention as well as Canadian inflation data.
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