Investing.com - The pound extended gains against the dollar on Tuesday and the yen fell further as political uncertainty in the U.K. eased and Japan prepared fresh economic stimulus measures, boosting risk appetite.
GBP/USD advanced 1.24% to 1.3151, rebounding from the post-Brexit 31-year low of 1.2794 set last Wednesday.
Sterling found support as investors reacted to the news that Britain’s home secretary Theresa May would soon replace David Cameron as prime minister, removing some of the political uncertainty that has hit the currency in the wake of the June 23 vote to leave the European Union.
Bank of England Governor Mark Carney said Tuesday there will be no “credit crunch” after Brexit, because banks will have funds available to lend.
The comments came during testimony to Parliament's Treasury Committee on the financial stability report published by the BoE last week.
Carney also refuted allegations that the central bank attempted to scare voters about the economic risks of a Brexit vote in the run-up to the referendum, describing the allegations as “extraordinary”.
The BoE said before the referendum that a vote to leave the EU could cause a material slowdown in the economy.
Earlier Tuesday, the minutes of the BoE's meeting held in the wake of the Brexit vote showed that a decision to cut banks' capital requirements was unanimous.
Carney said that by relaxing the rules for banks he wanted to take concerns about credit supply off the table.
The BoE has also made more than £250 billion available for banks to avoid a liquidity crunch in financial markets and said it expects to pump more stimulus into the economy over the summer.
The BoE is to hold its next monthly Monetary Policy Committee meeting on Thursday amid some expectations for a rate cut, but most analysts are expecting a first rate cut only in August.
The dollar extended gains against the broadly weaker yen, with USD/JPY hitting highs of 104.65, the most since June 24.
The pair was last at 104.52, up 1.68% for the day after rising 2.2% on Monday, the largest one-day percentage gain since October 2014.
The yen remained under pressure after Japanese Prime Minister Shinzo Abe’s ruling coalition increased its majority in the upper house in parliamentary elections on Sunday.
The win for Abe’s coalition fed hopes for a fresh package of stimulus measures to spur economic growth.
The yen had risen to multi-year highs in recent weeks as Brexit sparked fears over the outlook for the global economy.
The euro was higher against the dollar, with EUR/USD rising 0.33% to 1.1093.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.21% to 96.37.