Despite the Pound tumbling against most major currencies today, the British Pound to Japanese Yen (GBP/JPY) exchange rate continued to climb. While the pair has struggled to hold its best levels, investors are selling safe haven currencies like the Japanese Yen due to coronavirus developments and this is making it easier for the pair to avoid losses.
Following last week’s solid GBP/JPY advance from 141.43 to 143.23, GBP/JPY is continuing to advance this week.
GBP/JPY briefly dipped on Monday, but since then has been advancing again. Earlier today, GBP/JPY touched on a high of 143.75 – the best level for the pair since late-January.
GBP/JPY continued to trend close to its best levels all month at the time of writing as investors sold the Yen. At the time of writing, GBP/JPY is trending close to the level of 143.56.
Earlier in the session, investors were buying the Pound due to market hopes that Britain’s economy would rebound in the coming months.
Hopes are rising that the government will boost spending in the next budget, which could boost economic activity. On top of this, the latest UK data has also been solid with today’s UK inflation results also beating forecasts.
However, investors ultimately sold the Pound from its highs on Wednesday afternoon, as markets became jittery about the future of UK-EU relations after Brexit once more. An EU official said today that the bloc wold not give Britain special access to EU financial markets.
This limited the Pound’s strength today, but GBP/JPY still advanced due to the Japanese Yen’s broad losses today.
As the Japanese Yen is a safe haven currency, it has been slumping as safe haven demand lightens and investors feel more comfortable taking risks again.
The latest rise in risk-sentiment comes as the spread of the coronavirus outbreak is appearing to slow. Today reportedly saw the lowest daily rise in cases since January, which boosted hopes that the disease was being contained.
As a result, investors were more willing to take risks and the safe haven Japanese Yen plummeted. On top of this though, the Yen is also weaker due to strength in its rival the US Dollar (USD).
The US Dollar has been firming ahead of this evening’s Federal Reserve meeting minutes, which is putting pressure on the Yen.
The Pound to Japanese Yen exchange rate could continue to climb if coronavirus concerns continue to soften. The Yen is still relatively high following strong safe haven demand in January, so may have further to fall if risk-sentiment improves.
As a result, rising hopes of the virus spread being limited further would keep the Yen falling. On the other hand, a sudden worsening of the spread could lead to fresh safe haven demand and boost the Yen.
Meanwhile, Pound investors are eagerly anticipating upcoming UK data and any developments around the anticipated UK budget next month.
Key UK data due for publication tomorrow and Friday, including retail sales and PMI projections, could make it even easier for the Pound to Japanese Yen exchange rate to sustain gains if they impress investors.