The yen slid nearly 0.4% to 142.75 per dollar after climbing 1.8% on Friday
A surging yen steadied on Monday as Japan’s incoming prime minister indicated monetary policy should remain accommodative, while the dollar slid on commodity currencies underpinned by investor expectations of a turnaround in China’s economy.
Yen had jumped on Friday when Shigeru Ishiba, a former defence minister and erstwhile critic of aggressively easy policy won the leadership of the ruling Liberal Democratic Party, which controls parliament and will vote him into office.
The yen slid nearly 0.4% to 142.75 per dollar after climbing 1.8% on Friday. Ishiba told public broadcaster NHK that from the government’s standpoint, policy must remain accommodative as a trend given current economic conditions.
Analysts said that was enough to pause the sharp rise in the yen following his victory and that the likelihood of a snap election in the coming months – something Ishiba hinted at on Sunday – could weigh on the yen at least over the short term.
An election basically takes the BoJ out of the equation until December, a marginal yen negative, according to Ray Attrill, National Australia Bank’s head of foreign exchange strategy.
Elsewhere the euro was steady at $1.1172 and sterling traded at $1.3381 with markets looking to U.S. jobs data on Friday as the next major data point that could guide the pace of U.S. interest rate cuts.
European inflation data on Tuesday and Chinese data due later on Monday are keenly awaited.
The Australian and New Zealand dollars traded near the 2024 highs they hit on Friday as rate cuts and expectations of fiscal support in China raised hopes of an improvement in the slowing economy.
The Australian dollar gained 0.3% to $0.6920, after jumping to a 20-month high of $0.6937 on Friday. The New Zealand dollar was 0.3% higher at $0.6360 after reaching its highest since December on Friday.
