The dollar declined 1.24% to 140.71 yen, a level not seen since December 28, before trading at 141.16 yen
The dollar dropped to its lowest against the yen this year on Wednesday after investors upped the chances of Democrat Kamala Harris beating Republican rival Donald Trump in November’s presidential election after a scheduled debate.
The yen received an additional boost from BoJ board member Junko Nakagawa, who reiterated that the central bank would continue to raise interest rates if the economy and inflation move in line with its forecasts.
The dollar declined 1.24% to 140.71 yen, a level not seen since December 28, before trading at 141.16 yen.
The dollar-yen pair tends to track long-term Treasury yields, which extended an overnight drop to reach their lowest since June 2023, at 3.605%.
Investors broadly see the dollar strengthening in the event of a victory by Republican nominee Trump, as tariffs might prop up the currency and higher fiscal spending could boost interest rates.
Sentiment on Wednesday was fragile, drawing flows out of the dollar and into the likes of the yen, the Swiss franc and gold.
There is definitely risk-off sentiment that is leading to caution, according to XTB research director Kathleen Brooks.
There are a lot of changes in this economic cycle – monetary, with monetary policy changes, and also political – and that is what is adding to the sense of unease, she added.
The dollar index slid 0.22% to 101.43 after advancing to a one-week top at 101.77 on Tuesday.
The Swiss franc firmed for a second day, pushing the dollar down 0.2% to 0.8455 francs.
The euro gained 0.2% to $1.1039, recovering from an overnight decline to $1.10155, its lowest since August 19.
The forex market is showing some further signs of risk aversion this morning although more from the strong performance of the safe-haven currencies rather than poor performance of the high-beta currencies, according to MUFG strategist Derek Halpenny.
