UOVEY United Overseas Bk (PK)

The Japanese yen surged Friday and other Asian currencies were battered as voters in the U.K. upset market expectations and backed their nation leaving the European Union.

The yen, considered a haven currency, strengthened to as high as ¥ 99.00 against the U.S. dollar—its strongest level since November 2013, and a 7.2% appreciation from its Thursday closing level.

While the British pound was the main focus of currency-market action, having fallen to its weakest level versus the U.S. dollar since September 1985, the yen's surge is the latest headache for policy makers trying to nurse the Japanese economy back to health.

Some traders said the rocketing yen could potentially trigger the Ministry of Finance to direct the Bank of Japan to intervene in the market. The yen later pulled back and was recently at 101.90 against the dollar.

Takashi Hiratsuka, a trading group leader at the asset-management division of Resona Bank, said the ministry might not engage in direct yen selling as some in the market expect.

He said the Japanese Finance Ministry is unlikely to intervene without consent from U.S. authorities, who have so far officially said the yen has been stable.

"I believe the authorities will come up with a scenario to guide the yen weaker indirectly by using steps, including more easing," Mr. Hiratsuka said.

The pullback in the yen after its dramatic strengthening was likely due to market participants betting that the Bank of Japan could step in to soothe the currency's excessive volatility, analysts said.

The yen shot past the 100.00 psychological barrier as preset trading orders were triggered, rallied to 99.00 versus the U.S. dollar, then rebounded to 101.50.

The prospect of global financial-market upheaval over Britain leaving the EU has upset currency markets around the globe.

Most of the moves may have been due to a reversal of earlier consensus bets that the U.K. would vote to stay.

China's yuan slid as much as 0.6% against the U.S. dollar Friday to notch a five-year low of 6.6148. The depreciation was of a greater extent than the central bank's daily yuan benchmark, which had implied a 0.2% weakening of the local currency.

The onshore-traded yuan has now stabilized with the People's Bank of China intervening in the market, a Shanghai-based senior trader at a domestic bank said, though the volume of its yuan-buying hasn't been very large. The yuan has crossed the 6.6000 psychological barrier twice this month, due to wild swings in major currencies.

Among other currencies in Asia, the Singapore dollar and the South Korean won were most affected by the unfolding U.K. vote results.

The Singapore dollar and the won slumped as much as 2.4% against the U.S. unit, versus their Thursday closing levels.

Malaysia's ringgit fell 1.7%, Indonesia's rupiah lost 1.0%, while the Philippine peso weakened 0.9% versus the greenback.

The Singapore dollar is highly vulnerable to external economic risks, more so than its neighbors, due to the city-state's reliance on global trade.

Victor Yong, interest-rates strategist for United Overseas Bank in Singapore, said that if a Brexit were to occur, the Bank of England might cut its base interest rate from the current record low of 0.50% potentially to zero, and this could happen within days, or at most weeks.

Given the urgency of the situation, the BOE will likely act quickly, though its first priority would be to ensure that interbank funding liquidity doesn't dry up.

Banks might refuse to lend to each other for fear of a deterioration of creditworthiness in the wake of a Brexit. The BOE has already laid out arrangements with other global central banks to flush the market with liquidity to prevent a freezing of the financial system, said Mr. Yong.

An interest-rate cut likely wouldn't happen on the same day, he said, but the central bank's bias would certainly shift toward easing policy. Mr. Yong said a zero interest-rate policy might prove too radical given the recent debate about its effectiveness, but a quarter percentage-point cut combined with an asset-purchase program might be announced, to buffer the Brexit's negative shock to the U.K. economy.

Kosaku Narioka and Shen Hong contributed to this article.

Write to Ewen Chew at ewen.chew@wsj.com

(END) Dow Jones Newswires

June 24, 2016 01:15 ET (05:15 GMT)

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