Takaichi Becomes PM, Yen Plunges
The Japanese Yen (JPY) exchange rate weakened sharply at the start of the week following the Liberal Democratic Party (LDP) leadership election results, which placed Sanae Takaichi as a strong candidate for Japan's first female Prime Minister. Takaichi is known for her dovish fiscal outlook and is expected to oppose further interest rate hikes by the Bank of Japan (BoJ). This sentiment triggered a massive sell-off of the safe-haven Yen during Monday's Asian trading session.
The Yen's weakening boosted the US Dollar (USD), bringing the USD/JPY pair closer to the psychological level of 150, its highest level since last August. This increase reflects market concerns about Japan's monetary policy, which is expected to remain loose under the new leadership.
However, the USD/JPY's rise is expected to be limited. The market is still weighing the possibility that the US Federal Reserve will cut interest rates two more times this year. Furthermore, concerns about the impact of the prolonged US government shutdown are limiting the potential for the Dollar to strengthen.
Overall, the yen's weakness provides a breath of fresh air for the dollar in the short term, but uncertainty in the US and dovish Japanese monetary policy create limitations for the USD/JPY pair's future movement. (az)
Source: Newsmaker.id
