(Bloomberg) -- Brexit fallout has given investors plenty of reasons to flock to the yen, making it the best performing major currency this week. Friday could bring another, as markets brace for a closely watched U.S. jobs report.
The yen has rallied 2.1 percent against the dollar since July 1 after an investor flight from U.K. property forced a number of funds to halt withdrawals, sending the pound down the most among developed-market peers over the period. The British referendum result has fanned concerns about global growth, which had suffered a setback after data last month showed American employers added just 38,000 jobs in May, the fewest since 2010.
While the effect of a unexpectedly strong payrolls number would have a limited effect on the outlook for Fed tightening, “if it's surprisingly weak like last month, risk-off sentiment will probably strengthen quite a lot,” said Kuniyuki Hirai, manager of foreign-exchange trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Coupled with continued concern about Brexit, “it's likely that we'll see the trend for yen strength gather pace,” he said.
Brexit's Shadow
The yen advanced 0.3 percent to 100.44 per dollar as of 7:16 a.m. in London, extending a gain to a fourth day. It climbed to as high as 99.02 per dollar for the first time since November 2013 on June 24, in the immediate aftermath of the Brexit vote. Japan's currency rose 0.2 percent to 111.30 per euro.
Political disputes in the U.S. ahead of November's presidential election have weighed on the dollar in recent days, and tensions may increase after at least four police were killed during protests in Dallas.
“There's plenty of reasons for dollar-yen to fall below 100 at the moment,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne. “You chuck in a major social situation such as the shootings and it's probably just enough to get a market that's very much on edge to move a little lower.”
The pound strengthened 0.3 percent to $1.2945, trimming its weekly decline to 2.4 percent.
Futures signal 12 percent odds the Federal Reserve will raise interest rates this year, from 76 percent at the start of June, before the release of the May jobs report.
The median estimate for Friday's data is a 180,000 position increase in hiring in June.
“The cautious tone still remains, so there will be continued support for the yen,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “If the payrolls number falls below the 100,000 range, it will support most safe-haven currencies.”
--With assistance from Mika Otsuka To contact the reporters on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net, Lilian Karunungan in Singapore at lkarunungan@bloomberg.net. To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Simon Harvey
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