Pound Sinks to 31-Year Low Versus Dollar on Brexit as Yen Surges
(Bloomberg) -- The pound sank to its weakest in more than three decades as Britain's vote last month to leave the European Union sent investors seeking haven assets, boosting the yen and pushing global bond yields to record lows.
The British currency surpassed lows reached in the immediate aftermath of the U.K.'s June 23 referendum, while Japan's currency climbed at least 1 percent against all 16 of its major counterparts. M&G Investments suspended a 4.4 billion-pound ($5.7 billion) real-estate fund on Tuesday, following on the heels of Aviva Investors and Standard Life Investments after a flurry of redemption requests. The 10-year U.S. Treasury yield fell to a record, while yields on longer-dated Japanese government bonds sank to unprecedented levels.
“The yen's gain comes as investors see less reason to buy the dollar as there is no end in sight for the downside to the pound and bond yields,” said Masashi Murata, a vice president at Brown Brothers Harriman & Co. in Tokyo. “How much damage the U.K. economy will incur remains to be seen, but it's not positive for the pound. It has more downside.”
The pound declined 1.3 percent to $1.2847 as of 11:25 a.m. in Tokyo Wednesday, after reaching a 31-year low of $1.2798. The yen rose 1.1 percent against the dollar to 100.65, after climbing to 100.58, its highest since June 24. It gained 0.8 percent Tuesday. The euro fell 0.3 percent to $1.1038.
Japan's Topix index of shares fell 3 percent as risk aversion torpedoed Asian equity markets.
Japanese Prime Minister Shinzo Abe said on June 28 that the government will carefully watch currency movements, and that he asked Bank of Japan Governor Haruhiko Kuroda to co-operate with Group-of-Seven nations to secure market liquidity.
“The yen strengthened in anticipation of further declines in Japanese stocks,” said Toshiya Yamauchi at Ueda Harlow Ltd., a margin-trading services provider in Tokyo. “Risks to further upside in the yen are growing and it may test the 100 level to see how the authorities respond.”
--With assistance from Daisuke Sakai and Hiroko Komiya To contact the reporter on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net. To contact the editors responsible for this story: Naoto Hosoda at nhosoda@bloomberg.net, Amit Prakash
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