Japanese Yen hangs near multi-month low as Japan’s election adds to BoJ rate hike uncertainty

• The Japanese Yen weakens in reaction to political development after Sunday’s election.
• The uncertainty over the BoJ’s rate-hike plan weighs heavily on the JPY amid a bullish USD.
• Bets for a less aggressive Fed policy easing and rising US bond yields underpin the buck.

The Japanese Yen (JPY) dives to a fresh three-month low against its American counterpart during the Asian session on Monday as the loss of a parliamentary majority for Japan’s ruling coalition fuels uncertainty about the Bank of Japan’s (BoJ) rate-hike plans. Apart from this, a generally positive risk tone is seen as another factor undermining the JPY’s safe-haven status, which, along with sustained US Dollar (USD) buying, lifts the USD/JPY pair further beyond the mid-153.00s. 

The incoming US macro data continues to point to a still resilient economy and reaffirms market expectations that the Federal Reserve (Fed) will proceed with smaller rate cuts over the year. Adding to this, the odds of Donald Trump winning the presidency and deficit-spending concerns after the US election trigger a fresh leg up in the US Treasury bond yields. This continues to underpin the Greenback and further contributes to the offered tone surrounding the lower-yielding JPY.