Pound Japanese Yen Exchange Rate Plummets as JPY Soars on Investors’ ‘Extreme Flight to Safety’

GBP/JPY Exchange Rate Sinks as Coronavirus Fears Boost Safe-Haven Demand

The Pound Japanese Yen (GBP/JPY) exchange rate plummeted by -2.53% today, with the pairing currently trading around ¥134.043 as the Japanese currency benefits from a sell-off of the US Dollar amid rising fears over the global coronavirus outbreak.

Analysts at ING commented:

‘Financial markets have suffered a rude awakening to notions that volatility was a thing of the past. We’re now seeing the kind of market dislocation not witnessed since the 2008-09 global financial crisis.’

‘This all conspires to deliver an extreme flight to safety, into the likes of the [Japanese Yen].’

The Japanese Yen (JPY) saw its largest one-day climb since 2016 as investors flocked to its safe-haven amid rising odds that the US Federal Reserve will slash its interest rates by 75 basis points.

Meanwhile, today’s publication of Japan’s Gross Domestic Product report for the fourth quarter, which fell below forecasts to -1.8%, left the Japanese Yen unmoved against its peers as the currency continues to receive support amid growing concerns over a possible global economic recession.

GBP/JPY Exchange Rate Falls as Brexit Uncertainty and Covid-19 Fears Weigh on Sterling

The Pound (GBP) fell sharply against the Japanese Yen (JPY) as Brexit uncertainty continues to haunt British markets, with reports that trade talks between the UK and EU ‘could be delayed’, according to the former Chancellor of the Exchequer, Phillip Hammond, due to Covid-19 developments.

Mr Hammond said:

‘If the virus starts to disrupt everyday life … and many other processes have slowed down as a consequence, there is no reason to think that Brexit trade talks will be immune, then the parties will have to work together in good faith to decide how to manage that.’

With a lack of UK economic data today, the GBP/JPY exchange rate remains subject to developments around both domestic and global coronavirus developments.

Paul Dales, Chief UK Economist at Capital Economics, also commented that the Bank of England (BoE) is expected to slash its interest rates from 0.75% to 0.50% in a couple of weeks.

GBP/JPY Outlook: UK Budget in Focus

Sterling traders are awaiting Wednesday’s publication of the new Budget. However, with the damage of the coronavirus being considered, Pound investors are remaining cautious ahead of the budget’s release.

Meanwhile, the Japanese Yen (JPY) is likely to continue benefiting from its safe-haven status as the global coronavirus epidemic remains in focus. Any signs of the epidemic being contained or limited, however, would see risk-appetite return and some of JPY’s gains begin to slip.

David Moore

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