Pound steady in Asia on possibility of a fresh stimulus

The pound held steady Wednesday and demand for higher-yielding currencies picked up as traders considered a meeting of Japanese officials and the possibility of fresh stimulus to counter the impact of Britain's EU exit.

In Tokyo, sterling bought US$1.3328, slightly down from US$1.3340 in New York where it had made gains after plunging to a 31-year-low US$1.3121 earlier in the week.

Japanese Prime Minister Shinzo Abe, Bank of Japan (BOJ) Governor Haruhiko Kuroda and Finance Minister Taro Aso held talks Wednesday morning before markets opened.

The meeting came a day after local media reported that Abe is being urged to unveil a 20 trillion yen (US$195 billion) stimulus package to counter the impact of Britain's vote to leave the European Union on the world's No. 3 economy.

"Japan's government and the BOJ are trying very hard to show they are in close contact and ready to take any action if necessary," Masamichi Adachi, senior economist at JPMorgan Chase and a former BOJ official, told Bloomberg News.

"I don't expect they will decide any coordinated action now as markets are not in a panic, but showing readiness to markets is better than doing nothing."

On Tuesday, South Korea unveiled a US$17 billion plan to support its already fragile economy in the wake of the British referendum. The South Korean won rose 0.84 percent against the dollar Wednesday.

In a sign that a sense of calm has returned, higher-yielding, riskier, currencies edged up - Malaysia's ringgit gained 0.5 percent, while the Australian dollar and Indonesian rupiah also pushed higher.

But some analysts warned further turbulence may return.

"This relative calm is unnerving, given how fragile investor sentiment is, and the likelihood of renewed GBP (pound) volatility," said Stephen Innes, senior trader at OANDA Asia Pacific.

"(Forex) markets should remain a hot spot for the foreseeable future."

Source: China Post

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