Yen Tumbles as Japanese Elections Loom: Economic Ramifications Await

The yen faced a fourth consecutive weekly decline amid looming Japanese elections, which could affect the Bank of Japan's policy plans. The dollar remained stable, buoyed by cautious Federal Reserve expectations and market speculation over Donald Trump’s potential return. Japanese politics may influence both domestic and global currency dynamics.

The yen hovered near a three-month low on Friday, marking its fourth straight weekly loss. This comes as Japan gears up for an election that could complicate the Bank of Japan's policy normalization plans.

The dollar remained stable, bolstered by restrained expectations of aggressive Federal Reserve rate cuts and growing speculation about Donald Trump's possible return as U.S. president. Opinion polls indicate that Japan’s ruling Liberal Democratic Party may lose its long-held dominance, posing implications for the BOJ’s rate hike efforts.

In a bid to stabilise the currency, a senior Japanese finance ministry official discussed recent exchange-rate movements with U.S. Treasury Secretary Janet Yellen. Meanwhile, the dollar continued to firm slightly, maintaining its trajectory towards a fourth consecutive weekly gain.

(With inputs from agencies.)