NEW YORK: The Japanese yen and euro weakened against the dollar on Monday on fiscal and political stability concerns after Japan’s ruling Liberal Democratic Party elected a new leader and France’s new government quit.
The yen declined after Japan’s ruling party picked conservative Sanae Takaichi, an advocate of late premier Shinzo Abe’s “Abenomics” strategy to boost the economy with aggressive spending and easy monetary policy, as its head on Saturday.
Her victory caused traders to reduce bets that the Bank of Japan will hike interest rates this month.
“It was unexpected that it was going to be Takaichi,” said Sarah Ying, head of FX strategy, FICC Strategy at CIBC Capital Markets in Toronto.
“There’s a little bit more focus on the back end of the curve now, just given that Takaichi is generally seen as a follower of Abenomics. The market expects a little bit more fiscal stimulus there.”
The dollar at one point rose more than 2 percent to 150.47 yen, its highest level since August 1. It was last up 1.64 percent at 149.86, and if sustained, that would be its biggest daily gain since May 12.
The euro reached 176.25 yen, the highest since the single currency was introduced in 1999. It was last up 1.28 percent at 175.38 yen.
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