The Pound to Yen exchange rate has largely maintained its advances throughout this week, only slipping slightly during Thursday’s session as members of the British public headed to the polls to vote on whether or not Britain will ‘Remain’ in the European Union.
Pound (GBP) Maintains Levels Despite ‘Brexit’ Possibility
The Pound reached two-week highs against against the Japanese Yen on Wednesday and, despite slipping a little, has largely maintained this level against the sturdy Yen. The pair currently fluctuates in the region of 154.5700.
With the UK holding the EU Referendum vote throughout the day, the Pound is in limbo while investors wait for new polls and the first results.
However, Sterling maintaining its height against many major currencies this week is a reflection of market confidence, with most markets already pricing in a ‘Remain’ result.
An increase of ‘Remain’ bets caused the Pound to surge on Monday, despite many experts claiming that a result was still too close to call.
Risk-Sentiment Remains High on Week of Vote
Sterling has become increasingly risky in recent weeks as its volatility has soared to near record highs and the unpredictable nature of ‘Brexit’ polls has caused considerable fluctuations in Pound levels.
As a result, this week’s polls indicating that ‘Remain’ sentiment was improving led to a widespread increase in favour towards risky currencies.
The Japanese Yen, currently considered one of the safest currencies on the market, has seen considerable drops against the Pound as investors flocked from it to GBP during the sentiment shift.
Japanese Yen (JPY) Risks Becoming Too Valuable if ‘Brexit’ Occurs
While most Asian currencies are seen as risky or emerging-market currencies that would plummet in the event of a UK ‘Brexit’ from the European Union, the ‘safe-haven’ Japanese Yen has its own reasons for needing a ‘Remain’ vote.
A weak US Dollar as well as unreliable commodity prices have recently led to the Japanese Yen hitting highs across the board, especially against its rival the US Dollar.
As a result, the Japanese government and Bank of Japan (BoJ) have issued repeated warnings that intervention in the forex market may be necessary to prevent the Yen from becoming overvalued.
The Yen’s current strength has already caused strength for Japanese exports, and as a result the currency weakening would benefit the Japanese government.
GBP/JPY Exchange Rate Forecast: Referendum Results on Friday
The results of Britain’s historic EU Referendum will be counted throughout Thursday night and Friday morning, with results expected to be released some time on Friday morning depending on how close things get.
A ‘Remain’ outcome would see the Pound soar against the Yen – possibly more so than against any other major due to the Yen being the current ‘safe-haven’ of choice for many investors. This would likely help the Yen depreciate to levels that the Bank of Japan (BoJ) are more comfortable with.
On the other hand, a ‘Leave’ vote could see the Yen surge. In coming weeks, a Yen surge would likely influence the Japanese government to co-operate with the US government on a forex market intervention, especially if the Yen accelerates past levels of 100 Yen per Dollar towards 90.