Yen Wobbles as Political Dust Settles and Fed Cut Bets Rise

The Japanese yen fell due to slow economic growth, while the U.S. dollar remained steady amid holiday-thinned markets. Prime Minister Sanae Takaichi's election win presents challenges, as Japan's economy barely grows. Fed rate cut expectations increase with lower U.S. inflation data, impacting global currency movements.

The Japanese yen faced declines on Monday following weak growth figures, while the U.S. dollar remained stable with traders anticipating potential Federal Reserve interest rate cuts this year. As U.S. markets were closed for a holiday, trade activity was limited, with similar closures in China, Taiwan, and South Korea.

After a significant jump following Prime Minister Sanae Takaichi's election victory, the yen eased 0.4% against the U.S. dollar. However, Japan's economic challenges were underscored by a meager 0.2% annualized growth. The Bank of Japan is expected to hold rates steady until at least mid-year despite previous hikes.

U.S. inflation data revealed less-than-expected increases, allowing the Fed flexibility for potential rate cuts. The markets speculate about a third cut possibility, with significant movements seen in the bond market. The forex landscape was largely steady, with other currencies experiencing minor fluctuations against the U.S. dollar.

(With inputs from agencies.)