Yen's Tumble: Japanese Political Moves Shake Global Currencies

The yen plunged to multi-year lows against global currencies as Japan braces for elections. Prime Minister Sanae Takaichi's potential election win could intensify the 'Takaichi trade,' pushing stocks and bond yields up while weakening the yen further. Speculation rises on potential Japanese intervention.

The yen plummeted to new lows against the dollar and European currencies as Japan prepares for an impending election. The currency witnessed a notable decrease, dipping below 159 per dollar for the first time since July 2024. Analysts remain attentive to developments at the Federal Reserve, following an investigation into Chair Jerome Powell, which could significantly influence long-term market trends.

Prime Minister Sanae Takaichi is leading the polls and is poised to dissolve parliament's lower house this January. Market speculators are increasingly considering the 'Takaichi trade', anticipating her fiscal policies might elevate stocks and bond yields yet weaken the yen. The Nikkei index reached record highs while government bond yields surged, indicating strong investor response.

As the yen's value continues to slide, economists ponder if Japanese authorities might step in to stabilize it. With the dollar/yen pairing nearing crucial thresholds, conversation turns towards intervention prospects. Meanwhile, moderate fluctuations in other currencies are maintaining previous gains, while potential U.S. economic indicators could inject volatility into the dollar.

(With inputs from agencies.)