Japanese Yen Rallies as Dollar Weakens
The Japanese yen jumped 0.7% to around 153.7 per dollar on Monday, recouping losses from last week as the US dollar weakened after President-elect Donald Trump named Scott Bessent as Treasury Secretary.
The US Treasury bond yields fell sharply in reaction to Scott Bessent's nomination as US Treasury Secretary. This, in turn, prompts traders to lighten their US Dollar (USD) bullish bets after the recent rally to a two-year high and drives some flows towards the lower-yielding JPY.
That said, the uncertainty tied to the Bank of Japan's (BoJ) rate-hike plans, along with the prevalent risk-on environment, could cap any meaningful appreciating move for the safe-haven JPY. Moreover, expectations that US President-elect Donald Trump's policies could reignite inflation and restrict the Federal Reserve (Fed) to cut interest rates slowly might act as a tailwind for the US bond yields.
Markets are betting that Bessent will prioritize economic and market stability over making abrupt policy changes, prompting traders to scale back on “Trump trades.” Domestically, investors are closely watching Tokyo’s inflation figures set to be released this week, as they are considered a leading indicator of nationwide price trends.
Last week, mixed economic data offered no clear signals on Japan’s monetary policy direction.
Meanwhile, Bank of Japan Governor Kazuo Ueda suggested the possibility of another interest rate hike as soon as December, citing concerns over the recent weakness of the yen.
In addition, Prime Minister Shigeru Ishiba’s administration is reportedly considering a $90 billion stimulus package to alleviate the impact of rising prices on households.
Source: Trading Economics
