Worries that Britain could vote to leave the European Union in two weeks' time spread across the currency market on Friday, with the safe-haven yen hitting an eight-week high as investors ditched riskier assets for safety. As a risk-off mood across markets drove down emerging-market currencies and sent yields on Japanese and German 10-year bonds to record lows, the safe-haven Swiss franc gained 0.3 percent to trade at 1.0878 francs per euro, its strongest since April 14.
The yen also strengthened, up 0.4 percent on the day at 106.68 against the dollar, not far from a 1-1/2-year high of 105.55 yen touched last month. "People are getting a bit nervous about risk at the moment," said HSBC's global head of FX research David Bloom, in London. "We've seen bond yields go lower, we've seen equities and emerging markets come off a bit, and some of the high beta trades are coming off, so you expect currencies like the Swissie to perform well."
The biggest mover on the day among developed-world currencies was the Swedish crown, which weakened by 0.6 percent to a 2-1/2-week low of 9.2535 crowns per euro, having also fallen for the two previous days. "The moves in the last few days have mainly been locals selling the Swedish crown," said a currency trader at a Scandinavian bank. "The euro was lower against both the Swedish and Norwegian crowns earlier in the week and everyone was expecting that to go further, so the market has been caught the wrong way round and stops have probably gone."
The dollar index was flat on the day but on track for a modest weekly gain of 0.3 percent, having last week shed 2 percent as a much worse than expected US jobs report poured cold water on the view that the US Federal Reserve could raise interest rates in June or July. The Fed will kick off its two-day policy meeting next Tuesday, while the Bank of Japan will start a two-day policy meeting on Wednesday. Bank of New York Mellon currency strategist Neil Mellor said Brexit uncertainty could limit central bank action, and therefore market action, until Britain's June 23 referendum on EU membership had passed.
"We've got a market that is about to batten down the hatches - we're heading into a period of a lot of uncertainty," Mellor said. "A lot of central banks are putting off decisions because of the referendum, and I think next week could therefore be a bit of a wash-out."
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