The Japanese yen saw its strongest weekly performance in three months, rising 2.4% this week against the US dollar, reaching 151.59 per dollar. The improvement came after a series of losses incurred by the yen since the US election, reflecting a positive change in its trading. This strong performance reflects growing expectations among investors for a rate hike in Japan next month, with markets pointing to a 55% probability that the Bank of Japan will raise interest rates in December.
This forecast is one of the factors that contributed to the support of the yen this week, in addition to expectations of increased efforts by the Japanese government to support the currency.
In contrast, the US dollar stabilized after experiencing volatility due to the announcement by the South Korean central bank of a surprise rate cut. The move by South Korea came at a sensitive time, as the authorities fixed the won exchange rate after the recent cut in interest rates, raising some concern in markets about monetary policy in the region.
These movements in the currency markets reflect the impact of monetary policy by central banks, especially in Japan and South Korea, on currency prices. While traders believe that a rate hike in Japan could have a positive impact on the yen, a rate cut in South Korea is a move to ease domestic economic pressures, further complicating the overall picture of the Asian economy.
The US election has a strong impact on the movement of global currencies, including the Japanese yen, as its performance depends on expectations related to US economic policies The strong performance of the Japanese yen this week reflects growing expectations of interest rate hikes in Japan, boosting investor confidence in the currency
Factors that boosted the performance of yen
The Japanese yen has seen a significant improvement over the past week, recording its strongest performance in three months. This improvement can be attributed to several fundamental economic and political factors that contributed to the strengthening of the Japanese currency.
Among these factors, the Bank of Japan is increasingly expected to raise interest rates in the near future, especially with growing signals from the market that the bank may take a step to raise rates in December. This forecast may reflect signs that Japan’s economy is growing enough to benefit from tightening monetary policy, boosting the yen’s attractiveness as an investment currency.
Moreover, Japan’s improved economic performance and increased expectations of a rebound in economic growth also contributed to the yen’s appreciation. With bets on a rate hike increasing, traders see a potential shift in the Bank of Japan’s policy of negative interest rates, which would increase demand for the yen.
Another factor that has contributed to the yen’s strengthening is the movements of other currencies, especially the US dollar. The dollar has been relatively stable recently after the surprise rate cut in South Korea, which indirectly affected other currencies in the region. In contrast, some other currencies, such as the South Korean won, fell as a result of the rate cut in South Korea, which made the yen appear stronger against those currencies.
Also, there is an important role for the global economic environment, as currency markets are affected by monetary policy trends in major economies. While investors expect the Bank of Japan to move interest rates soon, this reflects a shift towards tightening monetary policy in one of the world’s largest economies, boosting confidence in the yen and making it more attractive compared to other currencies.
The impact of the US elections on the Japanese yen
The U.S. election is an important factor affecting global financial markets, including the currency market. In the case of the Japanese yen, these elections could have a significant impact due to the close relationship between US economic policies and currency markets. U.S. elections affect the market through several channels, including expectations about monetary policy in the United States, international trade, and the balance between supply and demand for currencies.
When U.S. elections take place and results emerge that could affect future economic policies, investors react to the currency market quickly. If the results indicate significant changes in fiscal or monetary policy in the United States, such as the possibility of raising or lowering interest rates, this could create significant volatility in financial markets. If traders expect that U.S. economic policy will change to the detriment of the U.S. dollar, investors may turn to other safe-haven currencies such as the Japanese yen.
Recently, the Japanese yen has seen some decline due to the results of the US elections, as markets were expecting significant changes in economic policy that may negatively affect the Japanese economy. After the election, the yen began to recover gradually as expectations of monetary policy tightening by the Bank of Japan increased, which could enhance the yen’s attractiveness against other currencies.
On the other hand, if the results of the US elections lead to trade changes that may harm the Japanese economy, such as an increase in Tariffs or restrictions on trade, the yen could suffer as a result of declining investor confidence in Japan’s economy. Policy changes may lead to volatility in financial markets, leaving direct effects on the value of the yen against the dollar and other currencies.
