Yen rises Takaichi after Japan election win boosts investor confidence. Australian dollar climbs and U.S. dollar slips ahead of payroll data

The Japanese yen strengthened on Wednesday, rising nearly 0.4% to 153.80 per dollar, as investors reacted positively to Prime Minister Sanae Takaichi’s decisive election victory and the prospect of more disciplined fiscal management.

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Political analysts said Takaichi’s landslide win has given her government the leverage to pursue a coherent fiscal agenda, easing uncertainty around Japanese government bonds and supporting the yen.

Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho, described the outcome as a clear signal of reduced market risk.

The euro weakened to 183.15 yen, while sterling dropped to 210.00 yen.

Trading volumes were subdued due to a public holiday in Japan, but market participants cited the election outcome as the main driver of currency movements.

Foreign inflows into Japanese equities have risen since the election, reflecting expectations that fiscal measures may benefit both consumers and corporations.

Yusuke Miyairi, Nomura’s strategist for yen foreign exchange, suggested that dollar-yen could approach 150 if rate differentials narrow and Takaichi’s administration prioritises fiscal prudence.

Elsewhere in the Asia-Pacific, the Australian dollar surged past $0.71, marking its highest level since February 2023, after hawkish remarks from a senior Reserve Bank of Australia official reinforced expectations of further rate hikes.

Moh Siong Sim, currency strategist at OCBC, noted the Australian dollar could reach $0.73 by year-end given the RBA’s renewed tightening.

The U.S. dollar, meanwhile, edged lower ahead of the release of January’s non-farm payrolls report. Economists project a gain of around 70,000 jobs, with the unemployment rate steady at 4.4%. Carol Kong, currency strategist at Commonwealth Bank of Australia, said the payroll data would be critical in shaping Federal Reserve policy expectations.

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With Japan’s election results, Australian monetary policy signals, and pending U.S. employment data all influencing markets, analysts anticipate heightened volatility in currency markets in the coming sessions.