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Japan’s Yen Falls to Weakest in Almost 16 Years Versus Pound

(Bloomberg) -- The yen slumped to its weakest level in almost 16 years against the British pound, renewing concern over a currency depreciation that has dogged policymakers this year.

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The Japanese currency slid 0.1% touching 200.63 per pound, its weakest level since August 2008. Traders have returned to betting on a stronger pound on the view that UK interest rates will stay higher than in most other Group-of-10 countries, with the Bank of England set to lag behind other central banks in easing.

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“Even another hike from the Bank of Japan won’t do much to dissuade traders from picking nearly any other major currency over the yen,” said Helen Given, a foreign-exchange trader at Monex. “Unless other G-10 central banks surprise with far more policy easing than currently expected, the yen has little to grab onto.”

The latest leg of the move comes as carry traders look to harvest extra returns pile into currencies such as sterling, where yields are far higher. The yen has the lowest interest rate in the world and has tumbled this year versus all of its peers among developed economies.

Japanese authorities are suspected of having intervened in the market on two occasions since late April to support the currency. While the Bank of Japan has raised interest rates once and is slated to do so again, investors say monetary policy remains far too loose to stem the currency’s decline.

“We see a bit more room for GBP/JPY to further rally,” said Howard Du, an FX strategist at Bank of America Corp., who said the pair can get to 206 by year-end.

Leveraged funds have turned bullish on the British pound after four weeks of betting against the currency, while boosting their already elevated short yen bets, the latest data from the Commodity Futures Trading Commission show.

A report last week showed a slower-than-expected cooling in UK inflation, causing traders to push back wagers on the first cut until later in the year.

--With assistance from Nazmul Ahasan and Stephen Kirkland.

(Updates with chart, comment in the sixth paragraph)

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