Currency Shifts: Yen Drops Post-Election as Dollar Holds Steady

The Japanese yen dropped following recent growth data, reversing previous gains due to political stability. Meanwhile, the U.S. dollar held firm, driven by inflation figures influencing Federal Reserve policy bets. Mixed global market activity is noted with several Asian markets closed for holidays.

The Japanese yen experienced a downturn on Monday, offsetting some of the significant gains from the previous week. This shift follows the release of weak economic growth figures. Concurrently, the U.S. dollar maintained its position, buoyed by recent inflation data that has fueled expectations for Federal Reserve interest rate cuts within the year. However, trading activity is expected to remain limited due to holiday closures across major markets, including the U.S., China, Taiwan, and South Korea.

The yen depreciated by 0.5% against the U.S. dollar, settling at 153.43. This comes after a dramatic surge of nearly 3% last week, marking its most notable rise in approximately 15 months. The surge followed Prime Minister Sanae Takaichi's overwhelming victory with the Liberal Democratic Party. Despite the political success, the latest figures reveal Japan's economic struggles, with a meager annual growth of 0.2% last quarter.

In related developments, Bank of Japan Governor Kazuo Ueda met with Prime Minister Takaichi. The meeting, their first since the election, involved discussions on economic and financial fronts, yet no explicit monetary policy demands were made. Analysts anticipate no immediate rate adjustments, with the central bank potentially waiting until July, despite the yen's prolonged underperformance compared to other major currencies.

(With inputs from agencies.)