Yen Hits Two-Month Low, As Markets Adjust To Takaichi's Economic Agenda

The yen weakened against the dollar and euro as Japan braces for a new fiscal approach under incoming Prime Minister Sanae Takaichi. As bond yields rise and the euro faces pressure, markets are watching for signals from central banks amidst global political movements and economic uncertainties.

The yen experienced a significant drop to a two-month low against the dollar on Tuesday. This shift follows fiscal dove Sanae Takaichi's victory for party leadership in Japan, sparking speculation about her potential cabinet choices and the country's future economic direction.

Japan's currency also reached a record low against the euro, coinciding with a rise in domestic bond yields and an impending debt auction. Economists foresee a more expansionist administration under Takaichi, considered to be the most dovish candidate among the recent contenders.

The euro is on fragile ground, mirrored by political changes in France. The ECB hinted at a possible rate cut amid inflation concerns. Meanwhile, the U.S. government shutdown continues to overshadow other economic indicators, keeping markets attentive to Federal Reserve actions.

(With inputs from agencies.)