The Japanese yen fell sharply overnight, following the election of Sanae Takaichi as the new leader of the ruling Liberal Democratic Party (LDP). Her victory means that she is set to become Japan’s first female prime minister. The USD/JPY gapped higher from Friday’s close, gaining around 2% at one stage, and breaking above 150.00 for the first time since the beginning of August.
Source: TN Trader
Ms Takaichi is strongly conservative, and markets now expect the Bank of Japan (BOJ) to hold back from tightening monetary policy until next year. That should give its current dovish policy a little longer to help boost Japan’s flagging economy. Despite the fall in the yen, the USDJPY is still a long way below the highs from summer 2024, just before the yen carry-trade unwound so spectacularly.
The US dollar also got a lift from weakness in the euro. The single currency came under heavy selling pressure following the unexpected resignation of France’s new Prime Minister. His resignation after less than a month highlighted the political tensions building across the Eurozone – not just in France, but in Germany too.
The Dollar Index pushed back above 98.00, raising hopes amongst dollar bulls that the bottom may be in for the greenback. The US dollar has had a torrid year so far. The Dollar Index traded near 110.00 in January.
Three weeks ago, it fell to a multi-year low under 96.00, representing an overall loss of around 15%. It had come under relentless downside pressure due to expectations of lower US interest rates as the ECB and the Bank of England went on hold, and as the Bank of Japan pondered raising rates further throughout the year. It’s also no secret that the Trump administration is pushing for a weaker dollar, as this should help boost sales for US exporters.
