- The Japanese Yen (JPY) slumps after gains last week
- Fiscal dove Sanae Takaichi won the election this weekend
- The US Dollar (USD) rises versus its major peers
- US government shutdown continues
The US dollar Japanese yen (USD/JPY) exchange rate is rising after losses last week. The pair fell 1.3% in the previous week, settling on Friday at 1477.45. On Monday at 15:30 UTC, USD/JPY trades +1.75% at 150.01 and trades in a range of 149.07 to 150.47.
The Japanese yen is falling, weakening by the most in five months against the US dollar, after the weekend’s elections showed that Sanae Takaichi appears on track to become Japan’s next Prime Minister.
Fiscal dove Takaichi, with an expansionary fiscal agenda for the world’s fourth largest economy, won the ruling Liberal Democratic Party leadership election at the weekend, putting her on track to become the first female Japanese Prime Minister.
Her victory has led the market to rein in expectations that the BoJ will hike rates this month, causing the yen to fall sharply.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback against a basket of major currencies, is rising 0.45% at 98.16 after losses last week.
The USD is rising as it capitalises on a weaker yen and a weaker euro as politics drives losses in both these currencies.
The market continues to grapple with the US government shutdown, which is resulting in an absence of important US economic data releases.
On Friday, the US NFP report was delayed, and this week, the US CPI inflation report is unlikely to be released. Instead, the market will focus on the minutes to the September FOMC meeting, which will be released this week, as well as a speech by Federal Reserve Chair Jerome Powell. These events could provide further clues on the chances of a Fed rate cut in October and December.
The market is pricing in an 87% chance of two Fed rate cuts by the end of the year.
