The yen tumbled to a nearly three-month low, slipping as much as 1% to 153.88 per dollar on Monday, after Japan’s ruling coalition missed securing a majority in parliament. The unexpected election outcome, resulting from Prime Minister Shigeru Ishiba’s snap election gamble, has spurred concerns over potential political instability and dampened hawkish expectations for the Bank of Japan (BOJ). With Japan’s ultra-low rates in stark contrast to those in the U.S., the yen remains pressured, and the BOJ is widely expected to maintain its current rate stance at Thursday’s policy meeting.
Investors are bracing for a busy data week with key economic releases from China, the Eurozone, and the U.S., including Chinese PMIs, Eurozone growth figures, and U.S. payrolls, as they position for year-end. In Asia, top Chinese banks’ earnings and Australia’s inflation numbers are in focus, along with BOJ’s policy call, all critical for assessing the yen, as well as the risk-sensitive Australian and New Zealand dollars. Meanwhile, the U.S. dollar may retain strength as high Treasury yields continue to weigh on emerging market assets.