By Josie Cox
European shares tentatively tracked gains on Wall Street on
Thursday, but all eyes rested on the Scottish referendum, keeping
moves in both currency and stock markets range-bound.
In early trade, the Stoxx Europe 600 added 0.3%, while Germany's
DAX and France's CAC rose 0.4% and 0.2% respectively. On Wednesday,
the Dow Jones Industrial Average struck yet another record closing
high, as investors embraced reassurance from the Federal Reserve
that it would continue on its cautious course toward a rate hike
next year.
The dollar surged to a six-year high against Japan's yen,
hitting Yen108.87, while the euro fell to a 14-month low of $1.2852
before recovering slightly, underscoring the diverging paths
between the Fed and the Japanese and European Central Bank, which
are both still loosening monetary policy.
Also on Thursday, the Swiss National Bank said it was keeping
rates on hold, surprising a minority that had speculated the bank
would move lower, driven by its nearly three-year-old policy to
keep the euro above 1.20 against the franc.
Switzerland's central bank introduced the minimum exchange rate
in September 2011, at a time when an apparently relentless slide in
the then crisis-struck euro was threatening to stir up deflation in
Switzerland by slamming import prices and pinching exporters.
It hasn't intervened to defend the currency since late 2012,
analysts said, but it frequently reiterates its commitment to the
exchange-rate floor.
After the announcement, the franc was trading 0.2% higher
against the euro at 1.2080 francs.
Scotland assumed center stage as residents started taking to the
polls in a vote on whether the country will separate from the
remainder of the U.K., ending a 300-year union.
Turnout is forecast to be high, with voting officials expecting
more than four million Scots to vote at 2,600 locations across the
country.
Pollster YouGov released a survey on Thursday morning that put
pro-union support narrowly in the lead. The survey showed 49% of
the more than 3,000 people polled between Monday and Wednesday
supported keeping Scotland in the union and 45% supported
independence. The rest were undecided or didn't know, YouGov
said.
"Bookmaker exchanges currently price the 'yes' probability a
little above 20%," Josh O'Byrne, a currency strategist at Citigroup
says.
"This seems reasonably fair compared to our estimate, although
it could be sensible to assume it somewhat higher given the degree
of dispersion in the polls," he adds.
The British pound climbed by around 3% during the first six
months of the year, hitting a 2014 high of $1.71 against the dollar
in mid-July helped by the U.K. enjoying one of the most robust
recoveries of all European economies after the financial
crisis.
In August however, as the first polls emerged showing that the
Scottish vote would likely be close, the currency sold off with
investors unsure of what impact a split might have.
On Thursday morning, it was trading marginally higher against
the dollar at $1.627.
Geoffrey Yu, a senior currency strategist at UBS said that the
results should "create an inordinate amount of intraday [currency]
volatility during the Asian session, owing to the fact that results
will be drip-fed to the market in parcels."
In the government bond market, the yield on the 10-year U.K.
Gilt was at 2.55%, around 0.02 percentage point higher. Yields rise
as bond prices fall.
London's FTSE clung to a 0.1% gain in early trade, having closed
lower for a third consecutive session on Wednesday.
In commodities markets, gold was 0.9% lower on the day at
$1,224.50 a troy ounce. Brent Crude waned 0.6% to $98.36 a
barrel.
Write to Josie Cox at josie.cox@wsj.com