Global Capital Seeks Safe Market after Brexit

The Japanese yen surged Friday and other Asian currencies were battered as voters in the U.K. upset market expectations and backed their nation leaving the European Union. The yen, considered a haven currency, strengthened to as high as ¥99.00 against the U.S. dollar—its strongest level since November 2013, and a 7.2% appreciation from its Thursday closing level.

Investors have grown concerned about global growth, and central banks have taken interest rates into negative territory. Gold has also benefited as the Federal Reserve has cut projections for interest-rates that’s planned for this year. Higher rates tend to weigh on gold, which pays its holders nothing and struggles to compete with yield-bearing assets when borrowing costs rise.

Some traders said the rocketing yen could potentially trigger the Ministry of Finance to direct the Bank of Japan to intervene in the market. The yen later pulled back and was recently at 102.35 against the dollar.

Takashi Hiratsuka, a trading group leader at the asset-management division of Resona Bank, said the ministry might not engage in direct yen selling as some in the market expect. He said the Japanese Finance Ministry is unlikely to intervene without consent from U.S. authorities, who have so far officially said the yen has been stable.

Gold prices also soared on Friday, after Britain’s decision to leave the European Union sent investors flooding into safe-haven assets.

Gold for August delivery was recently up 5.2% at $1,328.20 an ounce on the Comex division of the New York Mercantile Exchange. Gold prices spiked as high as $1,362.60 on Thursday night, hitting the highest level since March 2014.

The sharp move in gold followed a shift in expectations for the U.K. referendum outcome, after traders spent the past week betting that Britain would vote to stay in the EU. Friday’s gains broke a five-day losing streak that had taken gold to a two-week low.

 “As soon as the market got a hint that it could tilt the other way is when this volatility kicked in,” said Bob Haberkorn, senior market strategist at RJO Futures.

A British exit, or “Brexit” has increased demand for safe assets in the face of economic and political uncertainty. Analysts have noted that a Brexit may also decrease the likelihood of the Federal Reserve raising interest rates in the coming months, which would support gold prices.

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