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If you’re thinking of stocking up on Sterling, exercise patience. Ditto UK property. Because in the past few days there has been a dramatic swing in British sentiment with the one horse racing turning into a very tight contest. The money flows still favour a “Remain” vote on June 23rd when the UK votes on whether to stay in the EU. A successful punt on that result through betting exchange Betfair today offers 65p profit for every £1 wagered while a winning “Leave” bet would be worth £1.50. But those odds have contracted dramatically in the past week when a Brexit offered eight times the Remain profit. Now it’s just 2.3 times. Impetus will doubtless be added by this morning’s Times of London poll which gives “Leave” a hefty seven point margin – 46% for Brexit against 39% to stay. Even the City-focused Financial Times’s poll has Leave two points ahead, at 45% to 43%. The Leave campaign’s momentum is building at the right time, too, with the gap having widened from a single point at the end of last week. Whether the notoriously inaccurate polls are reflecting a genuine swing in sentiment or simply a reflection of the British public’s traditional support for the underdog will be revealed in nine days time. But with Sterling now trading at a nine week low for the first time since calling the Referendum UK Prime Minister David Cameron must be starting to sweat. – Alec Hogg
(Bloomberg) — The pound fell toward an eight-week low while the yen approached its strongest level since October 2014 as concern the U.K. will vote to leave the European Union prompted demand for safer assets.
Four polls from three companies have put the “Leave” campaign ahead against “Remain” before the June 23 referendum. A gauge of the pound’s one-month volatility climbed to the highest since 2008 as traders prepare themselves for the financial turbulence that may happen after the vote. A measure of swings in Group of Seven currencies rose to a two-month high before central bank meetings in the U.S., Japan and U.K. this week.
“Risk sentiment has taken a beating with volatility up partly on latest Brexit polls still showing the U.K. is on course to quit the European Union,” said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd. in Sydney. “Amid all of of this, the yen continues to demonstrate its preeminent safe-haven characteristics.”
Sterling lost 0.6 percent to $1.4182 and fell against all 16 major peers as of 1:30 p.m. Tuesday Tokyo time. It reached $1.4116 on Monday, the weakest level since April 14. Implied volatility for one-month options on the pound versus the dollar rose to 28.55 percent on Monday. That’s more than three times the level at the end of last year.
The New Zealand dollar was the next-biggest loser after the pound, dropping 0.4 percent to 70.30 U.S. cents. The kiwi is retreating from a one-year high reached last week after the central bank left its benchmark rate unchanged. It’s the best performer among 16 major currencies in the past month with a gain of 3.8 percent.
Two new polls by ICM, which published both phone and online surveys, showed the “Leave” side opening up a 5 percentage-point lead over “Remain.” Then came a YouGov online survey showing “Leave” at 46 percent with “Remain” at 39 percent, and an ORB poll putting “Leave” at 49 percent and “Remain” at 48 percent among those certain to vote.
— Bloomberg (@business) June 14, 2016
Japan’s currency rose 0.2 percent to 106.03 per dollar, following a 0.7 percent advance on Monday. It reached 105.55 on May 3, the strongest level since October 2014. A JPMorgan Case & Co index of currency volatility for seven major currencies rose to 12.05 percent, the strongest level since April 8.
Abrupt changes in foreign-exchange levels are not desirable, Japan’s Finance Minister Taro Aso said on Tuesday. The yen has climbed about 19 percent since reaching a 13-year low of 125.86 per dollar on June 5 of last year. The yen’s surge accelerated after the Bank of Japan’s Jan. 29 decision to introduce a negative-rate policy fanned volatility.
Just eleven out of 40 economists surveyed by Bloomberg News forecast the BOJ will ease monetary policy at the meeting on June 15-16. While the Fed isn’t expected to raise rates on June 15, futures contracts as of Monday show a 46.5 percent likelihood of an increase by the end of the year, compared with 76 percent at the start of the month.
“The markets are also wary that the Fed, Bank of Japan and Bank of England are holding their monetary policy meetings this week,” Philip Wee, senior currency economist at DBS Group Holdings Ltd. in Singapore, wrote in a note. “Most will be interested to see how much Brexit risks have dampened Fed Chair Janet Yellen’s optimism” and there could be surprises from the BOJ.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.