TOKYO: The yen rallied Thursday on worries about the Japanese economy and uncertainty over Britain's future in the European Union, while investors awaited the release of US jobs data.
Japanese Prime Minister Shinzo Abe on Wednesday said he would push back by more than two years a planned sales tax increase that threatened to put a break on growth in the world's number three economy.
Such a move would give the government and central bank breathing room to kickstart growth. However, Abe failed to come up with any detailed plans to do so.
On Thursday, the dollar tumbled to 108.97 yen from 109.53 yen on Wednesday in New York and well off levels above 111 yen seen earlier in the week.
The euro dropped to 122.17 yen from 122.52 yen in US trade, while ticking up to $1.1208 from $1.1187.
Focus is now shifting to the Friday release of a monthly US jobs report, the last non-farm payrolls result before a policy meeting where the Federal Reserve could possibly raise US interest rates.
A strong reading in the May report will raise expectations of another increase in borrowing costs, after raising them for the first time in more than nine years in December.
The direction of Fed policy and whether Britain will vote to stay in the European Union later this month will likely affect the yen's course, analysts said.
A new poll this week showed a majority of voters favouring a British exit from the EU, with a referendum due on June 23.
There is widespread expectation that a break from the 28-country union will spur significant market turmoil and slow or stall the British economy. The pound was at $1.4429, down from $1.4478 Wednesday and well off the $1.4636 Monday.
"What we need to think from here is whether the Fed raises in June or July, as that will change the currency's path," Masato Yanagiya, head of currency and money trading at Sumitomo Mitsui Banking, told Bloomberg News.
"If markets see the exit risks heightening, risk aversion incentives will strengthen and leave more scope for the yen to rise," he added.
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