The yen is up 2.6% on the dollar since Prime Minister Sanae Takaichi’s Liberal Democratic Party swept to a landslide victory at Sunday’s election, and if that holds through to Friday it would be the largest weekly rise since November 2024.
A fourth straight session of gains pushed it as strong as 152.28 per dollar, before it settled back to 154. A break below resistance at 152.05 would signal a change in momentum for a currency that has spent years sliding in response to low interest rates and budget worries.
“It’s Japan buying,” said Naka Matsuzawa, chief strategist at Nomura Securities in Tokyo, with the yen – rather than the euro – turning into the favoured avenue for bets on a falling dollar and to back Takaichi’s plans to revitalise the economy.
That’s a change from pre-election selling on nerves about how her government plans to fund its pro-growth policies.
“Foreigners are buying both stocks and bonds,” Matsuzawa said. “With a stronger government, the market hopes for higher growth … If you look over the next 12 months, it might be we see a stronger yen together with stocks higher.”
The yen has also made significant headway against crosses, rising 2% on the euro in three sessions and breaking to the strong side of a 50-day moving average.
Positioning data showed that as of last week, speculators had a modest net short yen position, so recent gains have probably been boosted by some of those bets being unwound.
The threat of intervention around 160 to the dollar also has markets expecting that downside yen risks are protected.
“In our view, the yen is likely to appreciate slightly in the short term, supported by continued fears of potential government intervention and by current market positioning,” said Vincenzo Vedda, chief investment officer at DWS in Frankfurt.
“We do not expect the yen to return to what we would consider a fundamentally fair level in the 130s against the dollar.”
Moves elsewhere in the currency market were pretty modest but extended recent trends.
Traders have been inclined to take strong pieces of US economic data as a cue to expect a broader brightening in global growth and as a positive for non-dollar currencies – so the dollar got little boost from surprisingly strong US labour data.
The Australian dollar has been on a tear as the central bank has hiked rates and flagged the possibility of more to come as it combats inflation, with momentum and income attracting buyers.
It touched a three-year peak at US$0.7146 on Thursday before pulling back a bit. The kiwi stayed just shy of recent highs at US$0.6046. The euro eased below US$1.19 to US$1.1863 and sterling was steady at US$1.3625.
China’s yuan continued a remarkably steady rise that has it on track for its longest streak of weekly gains since 2012.
Lunar New Year demand for cash pushed it to a nearly three-year high of 6.8998 per dollar.
Later on Thursday British GDP data is due along with US jobless claims, with US January inflation figures due on Friday. Markets have priced about 54 basis points of rate cuts for the US this year.