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Pound Japanese Yen Exchange Rate Falls as Safe-Haven Demand Boosts JPY

GBP/JPY Exchange Rate Falls as Coronavirus Fears Boost Safe-Haven Japanese Yen

The Pound to Japanese Yen (GBP/JPY) exchange rate fell by -0.8% today, with the pairing currently trading around ¥140.186 as the Japanese currency benefits from its safe-haven status as the coronavirus (Covid-19) continues to reach near-pandemic levels.  

Mayank Mishr, a Strategist at Standard Charted, Singapore, commented:

‘I’m not surprised [the Japanese Yen is] reasserting itself. The safe-haven yen tends to do well even in scenarios when the Japanese economic outlook may be at risk. Unlike the Fed, which may be cutting rates, the Bank of Japan does not have that luxury – so the downward pressure on the currency from the yield channel does not materialise.’

With the US economy looking to go into a tailspin – along with rising odds of a rate cut from the Federal Reserve – investors have been seeking other safe-havens like the Japanese Yen and the Swiss Franc as global economic uncertainty continues

Today saw the release of Japan’s construction orders report for January, which fell by -17%. However, as the JPY/GBP continues to benefit from market demand for safe-haven currencies, this left the Japanese currency relatively unmoved.  

UK’s Post-Brexit Economic Uncertainty Weighs on Pound

The Pound (GBP) has remained subdued against many of its peers today after February’s UK GfK consumer confidence report fell by -7.

Joe Staton, Client Strategy Director at GfK, was upbeat in his analysis, however, commenting:

‘Although the Index remains south of positive, the trajectory remains upwards. The only ‘known unknown’ is the potential impact of coronavirus on behaviour, confidence and spending patterns. This is a developing story, watch this space.’

Today also saw the Nationwide housing prices report for February grow at their fastest rate in 18 months.

However, Robert Gardener, Nationwide’s Chief Economist, was downbeat in his assessment, saying:

‘The global economic backdrop remains challenging, with the coronavirus outbreak expected to weigh on global activity in the coming quarters. Investment is likely to remain subdued until the UK’s future global trading relationships become clearer, which is unlikely until early next year.’

Brexit concerns have continued to drag on Sterling today following comments from Prime Minister Boris Johnson that he could walk away from talks with the European Union unless there is a ‘broad outline’ of a Canada-style free trade deal.

With fears rising that the UK could leave the EU without a trade deal by the end of the transition period, market appetite for Sterling has continued to slip.

GBP/JPY Outlook: Could Sterling Rise on an Improving UK Manufacturing Sector?

Japanese Yen (JPY) investors will be looking ahead to Monday’s release of February’s Jibun Bank Manufacturing PMI. However, as this is expected to remain in contraction territory, we’re unlikely to see the Japanese currency benefit.

GBP traders, meanwhile, will be awaiting Monday’s UK Markit Manufacturing PMI for February. Any signs of an increase would prove Pound-positive.

Covid-19 developments will continue to dominate market attention next week. If the virus continues to rise to pandemic levels, we could see the Japanese Yen (JPY) further benefit from its safe-haven status.