The Japanese yen rose on Tuesday, reversing the losses recorded in Monday’s session against both the euro and the dollar, supported by expectations that Prime Minister Sanae Takaichi will continue expansionary fiscal policy, providing support to the currency.
Meanwhile, the US dollar posted slight gains against the euro over the past two sessions, as markets await signals later this week about the potential timing of interest rate cuts by the Federal Reserve.
Ahead of Japan’s general election held on February 8, long-term bond yields rose and the yen weakened, reflecting bets that Takaichi would launch additional fiscal stimulus packages after an election victory, which could fuel inflation.
Since the election, the Japanese government bond yield curve has flattened, market-based inflation has stabilized, and the yen has strengthened, as markets price in…
