The Japanese yen fell on Monday after Prime Minister Shigeru Ishiba announced his resignation, opening the door to a period of political and policy uncertainty in the world’s fourth-largest economy. Meanwhile, the U.S. dollar remained under pressure following last week’s weak jobs report, which strengthened expectations of a Federal Reserve rate cut this month.
Japan’s Political Shake-Up Pressures the Yen
Ishiba’s decision to step down has triggered speculation over his successor, with investors watching closely for potential policy shifts. Former Foreign Minister Toshimitsu Motegi has already announced his candidacy, while figures like Sanae Takaichi are also in the spotlight for their dovish stance on monetary policy.
The yen weakened sharply in Asian trade, with the dollar rising as much as 0.78% against it before easing to trade at 147.62 (+0.1%). The Japanese currency also dropped to its lowest level in over a year against the euro (173.13) and sterling (199.53).
Japanese stocks surged on the news, while government bonds remained steady, though super-long JGB yields stayed near record highs. Analysts warn that until a clear successor is chosen, volatility will likely remain elevated in yen, equities, and bonds.
Here you can read more about tips on a trading plan.
Weak U.S. Jobs Data Fuels Fed Cut Bets
The dollar, however, struggled to recover from Friday’s sharp losses after U.S. nonfarm payrolls showed a steep slowdown in job growth and unemployment rising to 4.3%, the highest in nearly four years.
Markets now price in strong odds of a 25-basis-point cut at the Fed’s September meeting, with a 10% chance of a larger 50-bp cut, according to the CME FedWatch tool.
The dollar index slipped 0.2% to 97.7, extending Friday’s drop below the 98.0 support level. The euro steadied at $1.1727, while sterling edged up to $1.352. Commodity currencies also gained, with the Australian and New Zealand dollars both rising 0.5%.
Market Outlook
With Japan facing leadership uncertainty and the U.S. economy showing signs of slowing, forex markets are bracing for heightened volatility. Traders will closely monitor the LDP leadership race in Japan and the Federal Reserve’s September decision, both of which are likely to set the near-term direction for the yen and the dollar.
Submit Your Comments
(Replying)
Please keep in mind to avoid offensive keywords and also fake information.
Be the first one to comment.