Yen Bounces Back After Japanese Officials Warn Against Sharp Currency Moves
Those comments did the job. USD/JPY fell to 156.50, losing about 0.5%. EUR/JPY went down 0.2% to 185.20.
Quick overview
- The yen strengthened after Prime Minister Sanae Takaichi's unexpected election victory, giving her party a supermajority.
- Despite the initial drop in the yen following the election results, comments from Japanese officials helped stabilize the currency.
- The dollar continued to weaken, with EUR/USD climbing above 1.1850 and gold prices rising significantly.
- Market reactions indicate that the yen remains highly sensitive to intervention talk from Japanese authorities.
The yen got stronger Monday following Prime Minister Sanae Takaichi’s huge election victory over the weekend. Her Liberal Democratic Party took a supermajority in the lower house. Nobody expected her to win this big.
The weird part? The yen dropped right after the results came out. Then Tokyo stepped in with words, not action. Minoru Kihara, the Chief Cabinet Secretary, said he doesn’t like seeing the currency move one way too fast. Atsushi Mimura, who handles currency policy, made it clear he’s keeping a close eye on things.
Those comments did the job. USD/JPY fell to 156.50, losing about 0.5%. EUR/JPY went down 0.2% to 185.20.
Meanwhile, Iran’s president said the nuclear talks with the U.S. are moving in the right direction. Trump said they’re meeting again this week. Oil prices fell over 1% to $62.60 a barrel on that news.
The dollar kept sliding, sitting under 97.50 after a positive week. U.S. stock futures were all over the place Monday morning following Friday’s rally.
EUR/USD climbed above 1.1850 as the dollar stayed weak. GBP/USD couldn’t really get going, stuck near 1.3600 in early European trading.
Gold had a monster day Friday, up almost 4%. Monday it kept climbing, breaking through $5,000. Worries about Fed independence and general market jitters are keeping buyers interested.
Later today, the Eurozone drops its Sentix Investor Confidence numbers for February. Central bankers from the ECB, Fed, and Bank of England are all speaking this afternoon.
What’s interesting here is how quickly Japanese officials jumped in. Takaichi’s landslide should’ve been seen as political stability, which normally helps a currency. Instead, the yen dropped initially. But Tokyo wasn’t having it. Just a few comments from the right people, and USD/JPY reversed.
This shows the yen’s still super sensitive to intervention talk. Japanese authorities don’t even need to actually buy or sell anything. Just threatening to do it moves the market, especially when dollar/yen gets close to levels that make Tokyo nervous.
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