Yen Soars On Brexit Fears As Asian Equities Slump

Risk aversion dominated the market mood on Monday as Brexit fears intensified and as investors geared up for central bank meetings by the Fed and the Bank of Japan later in the week.

Asian stock markets suffered sharp losses today with Australia’s ASX 200 index closing down 0.9% and China’s Shanghai Composite down 1.6%. However, Japan’s Nikkei 225 index was one of the worst performers as it ended the day 3.5% lower.

The soaring yen and disappointing data out of China weighed on Tokyo stocks today. The dollar fell to a 6-week low of 105.73 yen in late Asian trading before rebounding just above 106 yen. The euro slid to a fresh three-year low of 118.99 yen before bouncing higher to 119.45 yen. But the pound fell the most against the Japanese currency, as it tumbled to its lowest since August 2013 at 150.08 yen.

The Chinese yuan was another underperformer as the People’s Bank of China set a weaker midpoint and economic data missed expectations. The yuan was weaker at 6.5850 per dollar in late Asian session.

Fixed asset investment in China fell to the lowest since 2000 as it rose by 9.6% year-on-year between January and May, missing forecasts of 10.5%. Retail sales also disappointed, increasing by 10.0% year-on-year in May instead of the expected 10.1%. Industrial output was the exception as increased government spending on infrastructure projects helped the sector post a 6% annual gain, slightly above estimates of 5.9%.

The pound touched two-month lows against the greenback as it fell to 1.4157 dollars, while the euro also climbed to two-month highs, hitting 0.7949 pounds. Conflicting opinion polls in recent days have heightened concerns of a UK exit from the European Union, adding to the current market uncertainty.

Oil fell victim to the risk averse mood on Monday as US crude fell below $50 a barrel. WTI futures were last down 1% at $48.55 a barrel.

Commodity currencies held steady though as overall commodity prices were broadly higher today. The Australian dollar firmed to 0.74 versus the greenback in late Asian session, while the New Zealand dollar rose to 0.7061.

In other currencies, the euro edged up to 1.1259 against the dollar but the Swiss franc was weaker with the greenback trading at 0.9641 francs.

The remainder of the day is looking extremely quiet with no major data expected out of the main markets today.

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