The Japanese yen fell more than 1% to 146.495, marking its lowest point since early September. This decline is largely attributed to uncertainty surrounding Japan's leadership contest, where the results are eagerly awaited by investors. The competition to replace the current prime minister has garnered significant attention, with hardline nationalist Sanae Takaichi emerging as a key contender. As the contest heats up, the yen's slide reflects market anticipation of her potential victory, which could have broader economic implications.
Meanwhile, China’s stimulus measures have positively impacted risk-sensitive currencies. This week, China introduced several economic policies, including lowering the reserve requirement ratio for banks by 50 basis points. These actions aim to boost lending and stabilize the struggling economy. Along with key interest rate cuts, these measures have lifted stocks, commodities, and currencies tied to global risk, such as the Australian and New Zealand dollars.
While the yen falls, other major currencies, such as the Australian and New Zealand dollars, have benefited from China’s aggressive fiscal measures. The Aussie remained close to its 18-month high at $0.68705, while the kiwi also stayed near its nine-month peak at $0.6298. China's stimulus has stoked investor confidence, driving demand for these currencies.
In contrast, the U.S. dollar has remained under pressure. Despite a relatively strong U.S. labor market, traders expect further interest rate cuts this year. The Federal Reserve’s recent pivot from inflation control to ensuring a healthy labor market has also fueled these expectations. As a result, the dollar index remains at 100.86, slightly above its 14-month low.
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The yen falls as Japan's leadership contest heats up, while China’s stimulus measures lift risk-sensitive currencies like the Aussie.
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