Yen exchange rate today
According to Lao Dong, on October 8, the Japanese Yen (JPY) hit its lowest level since February against the US Dollar (USD) with the capital decline maintaining a widespread increase.
According to FXStreet, the Yen's recovery momentum is still weak due to expectations that the new Japanese government will continue to pursue an expanded fiscal policy.
According to FXStreet, the surprising results from Japan's new leadership election have made the market believe that the country will continue to apply an open fiscal policy - a move that could make it more difficult for the Bank of Japan (BoJ) to normalize monetary policy.
After the victory of Ms. Sanae Takaichi - known for her strong public spending stance, investors have almost ruled out the possibility of the BoJ raising interest rates this month. This has caused further downward pressure on the Yen, while the USD regained its slight upward momentum after the adjustment at the beginning of the week, bringing the USD/JPY pair closer to 150.50 - the highest in two months.
Yen faces many disadvantages
The Japanese Ministry of Home Affairs today released data showing that household spending in August increased by 2.3% compared to the same period last year, marking the fourth consecutive month of growth. The data reinforced the case that the BoJ may continue to raise interest rates in the coming period, but expectations of a new government chasing major spending packages made the market believe that the monetary tightening process would be delayed.
In the stock market, Japan's Nikkei 225 index has hit a new record high, supported by the prospect of expanding economic policies. Meanwhile, in the US, Nasdaq and the S&P 500 also hit new peaks earlier in the week, thanks to positive expectations ahead of the Q3 profit announcement season. Optimism in risk markets further reduces the attractiveness of the Yen - which is considered a safe-haven asset.
However, the USD's gains are still limited as investors expect the US Federal Reserve (Fed) to cut interest rates twice more this year. According to the CME FedWatch tool, the possibility of the Fed cutting interest rates by 25 basis points in October and December will reach 95% and 84%, respectively.
The continued US government shutdown until Friday due to the budget deadlock also creates new risks for the world's largest economy, making investors more cautious about the USD.
This week, the market will pay attention to the minutes of the FOMC meeting released on October 9 and the speech of Fed Chairman Jerome Powell on October 10, which is expected to provide additional signals on the upcoming interest rate cut roadmap - a factor that can shape new developments for the USD/JPY pair.
