Ster­ling soars to high­est since Brexit vote

Dol­lar leaps vs yen

The Jerusalem Post - - BUSINESS & FINANCE - • By JEMIMA KELLY

LON­DON (Reuters) – Cur­rency traders brushed off the lat­est mis­sile fired by North Korea in a volatile day of trad­ing on Fri­day, with the dol­lar surg­ing 1% against the yen while Bri­tain’s pound jumped to its high­est level since last year’s Brexit vote re­sult.

The dol­lar ini­tially dipped af­ter North Korea fired a mis­sile early on Fri­day that flew over Ja­pan’s north­ern is­land of Hokkaido far over into the Pa­cific Ocean, fur­ther ratch­et­ing up ten­sions af­ter Py­ongyang’s re­cent test of a pow­er­ful nu­clear bomb.

Ja­pan is the world’s largest net cred­i­tor na­tion, and in un­cer­tain times traders as­sume Ja­panese repa­tri­a­tion of over­seas funds will eclipse for­eign in­vestors’ sell­ing of Ja­panese as­sets. The yen there­fore has con­tin­ued to op­er­ate as a “safe-haven” de­spite Ja­pan’s ge­o­graph­i­cal prox­im­ity to North Korea.

How­ever, its fall against the dol­lar on Fri­day raised ques­tions over whether in­vestors are less will­ing to buy Ja­panese as­sets when Ja­pan is in the fir­ing line.

But af­ter slip­ping to as low as 109.55 yen in Asian trad­ing, the dol­lar re­bounded in Euro­pean trad­ing to trade up as much as 1% at 111.35 yen. It was on track for its best week against the Ja­panese cur­rency since Novem­ber.

The mis­sile launch came just days af­ter the United Na­tions Se­cu­rity Coun­cil stepped up sanc­tions against North Korea over its lat­est nu­clear test. An­a­lysts said mar­kets had been ex­pect­ing a re­ac­tion from Py­ongyang.

“The fact that we’ve had the mis­sile event means that short-term spec­u­la­tive traders can now re­fo­cus on the macro,” said MUFG’s head of macro strat­egy in Lon­don, Derek Halpenny.

“The logic tells you that maybe that near-term risk has re­ceded for a pe­riod of time, and that’s al­lowed the mar­ket to reestab­lish long dol­lar/yen po­si­tions based on what’s hap­pened in the Trea­sury mar­ket this week.”

The US 10-year Trea­sury yield last stood at 2.202%, hav­ing risen 14 ba­sis points (0.14 per­cent­age points) – the big­gest one-week rise since June.

The dol­lar and Trea­sury yields were sup­ported by the lat­est US con­sumer in­fla­tion data, which bol­stered ex­pec­ta­tions that the US Fed­eral Re­serve could raise in­ter­est rates again by year-end.

“The risk [from North Korea] is very ma­te­rial but I think com­pared with what we knew yes­ter­day, we don’t know a lot more to­day,” said RBC Cap­i­tal Mar­kets cur­rency strate­gist Adam Cole, also in Lon­don.

Pound surges

Bri­tain’s pound surged above $1.36 on Fri­day to its high­est level since the re­sults of last June’s vote to leave the Euro­pean Union, putting it on track for its best week against the dol­lar since Oc­to­ber 2009.

The pound had al­ready recorded its best day since April on Thurs­day, af­ter in­vestors brought for­ward their bets on when the Bank of Eng­land would raise in­ter­est rates af­ter it sig­naled it would do so soon.

It built on those gains on Fri­day af­ter BoE pol­icy-maker Gert­jan Vlieghe said “the ap­pro­pri­ate time for a rise in Bank Rate might be as early as in the com­ing months.”

The euro was up 0.3% at $1.1953, stay­ing be­low a two-and-a-half year high of $1.2092 set the pre­vi­ous week.

Bit­coin was down for an eighth con­sec­u­tive day close to $3,000 and was on track for its worst week since 2013 af­ter a 25% fall since Mon­day, as China shut down a sec­ond bit­coin ex­change and on re­ports that all cryp­tocur­rency ex­changes would be closed by the end of Septem­ber.

The Bank of Is­rael on Fri­day set its rep­re­sen­ta­tive rate for the US dol­lar at NIS 3.5230, for the Bri­tish pound at NIS 4.7309, for the Cana­dian dol­lar at NIS 2.8952, for the Aus­tralian dol­lar at NIS 2.8171, and for the South African rand at NIS 0.2680. The cen­tral bank set the rep­re­sen­ta­tive rate for the euro at NIS 4.1971, and for 100 yen at NIS 3.1819.

(Ste­fan Wer­muth/Reuters)

BANK OF ENG­LAND Gov. Mark Car­ney tests a new poly­mer 5 pound note as he buys lunch at White­cross Street Mar­ket in Lon­don last Septem­ber.

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