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Geopolitical Tensions Lift Yen, Pound Up on Brexit Delay Hopes


The yen and the British pound edged higher on Wednesday as geopolitical tensions and hopes of a Brexit delay supported the two currencies.

The US dollar-yen pair was trading down at 110.70 after dropping to 1-1/2 week low of 110.36 overnight. The Japanese currency advanced to 110.355 earlier in the day, its best since February 15.

The safe-haven yen tends to find strength during bouts of political and economic uncertainty. Tensions between India and Pakistan intensified after Pakistan said it shot down two Indian jets at its border.

The yen is the pick of major currencies as tensions flare between India and Pakistan and as the bullish global risk mood sours, according to strategist Kit Juckes, but noted that the market moves remained capped for now.

The Swiss franc, another safe-haven currency, also benefited from India-Pakistan dispute as it climbed to a three-week high of 0.9967 against the dollar. The Swiss franc last stood at 0.9978.

Meanwhile, the US dollar index added 0.02 percent to $95.882 against a basket of six major currencies, although it was hovering near a three-week low of $95.81 hit on Tuesday.

The greenback weakened overnight after Federal Reserve Chairman Jerome Powell reiterated that the the central bank would be patient about its policy approach, and as the sterling rallied.

As long as the Fed sticks to its neutral approach there is no monetary policy momentum, FX Strategist Esther Maria Reichelt said.

Investors are also monitoring the US-North Korean summit, which just kicked off in Hanoi on Wednesday.

US President Donald Trump and North Korean Supreme Leader Kim Jong-un are expected to further discuss about possibly dismantling North Korea’s nuclear weapons program during their second summit.

Sterling Gains Ground on Hopes for Brexit Delay

Elsewhere, investors are keeping a close eye on the sterling as it rose past 1.33 for the first time in five months.

Against the dollar, the pound gained 0.4 percent to 1.3315. The British currency lingered close to 21-month highs against the euro, with the euro-sterling pair shedding 0.5 percent to 0.8550.

The pound received a boost on Tuesday after UK Prime Minister Theresa May offered policymakers the opportunity to choose between a disorderly no-deal Brexit or delaying Britain’s departure from the European Union (EU) if her efforts to validate a Brexit accord fail.

The move reinforced prospect of a delay, weakening the risk of chaotic no-deal exit due on March 29.

May said she will give lawmakers two votes on March 13 and 14 in the event that her Brexit proposal fails to get approved by March 12.

The UK will only leave without a deal on March 29 if there is explicit consent in the House for that outcome, according to May, but the Prime Minister was certain that the British government was not eliminating the threat of no-deal Brexit.

May stated that an extension cannot take no deal off the table and the only way to do that is to revoke Article 50, which she shall not do, or agree a deal.

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