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Yen gains as risky assets lose traction, pound and euro shaky

By Shinichi Saoshiro and Ian Chua

TOKYO/SYDNEY (Reuters) – The yen gained broadly on Tuesday as risky assets lost traction and revived demand for the safe-haven currency, while the sterling and euro were shaky after suffering hefty losses on uncertainty over Britain’s membership in the European Union.

The dollar was down 0.6 percent at 122.235 yen (JPY=), surrendering overnight gains made on a bounce in equities and commodities, touching an 11-day trough of 122.00. The euro touched 123.71 yen (EURJPY=), its lowest since April 2013.

Tokyo’s Nikkei (.N225) gained early on Tuesday following an overnight surge on Wall Street, but soon flagged and stood unchanged by midday. Most stock markets in rest of Asia were in the red.

“Dollar/yen lost momentum as investor bids into Tokyo shares faded. It appears that speculative accounts continue to lead the action. Comments overnight from U.S. authorities are also weighing on the dollar,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

A senior U.S. Treasury official, speaking before a Feb. 26-27 meeting of G20 finance ministers and central bankers, told reporters Monday that the meeting in Shanghai would reiterate the importance of commitment towards avoiding forex rate misalignments.

In reiteration of existing G20 commitments, the Treasury official said members will also be asked again to refrain from manipulating exchange rates for competitive purposes.

The People’s Bank of China set the yuan mid-point rate at 6.5273 per dollar (CNY=SAEC) on Tuesday, the weakest guidance rate since Feb. 5.

BRUISED STERLING

The pound was last at $ 1.4139 (GBP=D4), having slid as far as $ 1.4057 (GBP=D4) – a low not seen since March 2009. It fell nearly 2 percent, posting its biggest one-day drop in almost six years.

Sellers took aim at the currency after London Mayor Boris Johnson, one of the country’s most popular politicians, announced his support for Britain to leave the EU.

He gave the “Brexit” camp a much-needed figurehead and raised the risk that Britons will vote to exit the bloc.

“Fears of Brexit have relegated the GBP to the bottom of the leader board,” said Rodrigo Catril, FX strategist at National Australia Bank.

“The euro was also an underperformer against the USD, suggesting the market is expressing some concerns for the euro if the UK chooses to leave the European Union.”

Britons will go to the polls on June 23 to decide whether to remain in the EU and sterling was expected to remain hostage to the ebb and flow in popular sentiment until the vote.

“Considering ill effects on the economy upon a ‘Brexit’, the Bank of England is unlikely to raise rates until the referendum even if the economy was booming,” said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.

“The referendum will likely dominate the pound in the near term, drowning out other factors that could move the currency,” he said.

The euro came within a hair’s breadth of $ 1.1000 (EUR=) for the first time in nearly three weeks. It has since edged back to $ 1.1040.

Investors warmed to the Australian dollar, thanks in part to a big rally in the price of iron ore, a major export for Australia. The Aussie scaled a near two-month peak of $ 0.7248 (AUD=D4) and was last at $ 0.7233.

(Reporting by Ian Chua; Editing by Dan Grebler and Kim Coghill)

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