Yen Dips Amid Japan’s Political Uncertainty, Dollar Awaits Key U.S. Data

Yen Struggles as Japan Faces Political Shift

The Japanese yen hovered near a three-month low on Tuesday following a loss of parliamentary majority for Japan's ruling coalition in recent elections. This shift has created political uncertainty, with potential implications for Japan’s fiscal and monetary policies. The yen rose slightly to 153.12 per dollar but remained weak, pressured by uncertainty surrounding the Liberal Democratic Party and the Komeito coalition's inability to secure a majority.

Carol Kong, a currency strategist at the Commonwealth Bank of Australia, noted, “Risks lean toward looser fiscal policy under the new government.” With strong U.S. economic indicators and heightened market volatility, the Bank of Japan (BOJ) may delay rate adjustments, potentially weakening the yen further.

Dollar Stands Firm Awaiting Key U.S. Economic Data

The dollar softened marginally yet remained close to recent highs, bolstered by strong U.S. economic data and investor speculation regarding a potential Trump election victory. The dollar index remained stable at 104.28, aiming for its strongest monthly performance in over two years.

This week’s anticipated U.S. economic releases include the core personal consumption expenditures price index on Thursday and nonfarm payroll data on Friday. “These figures could impact the dollar if they deviate from expectations,” remarked Ray Attrill, head of FX strategy at National Australia Bank.

Global Currency Movements

Meanwhile, the euro and sterling made slight gains, trading at $1.0816 and $1.2976, respectively, while the Australian dollar fell to its lowest in over two months.