Download App

[Yen Surges 2.7% to 15-Month High, "Buy Japan" Narrative Reverses Short-Selling Trap] ⑴ The yen surged over 2% against the dollar this week, its largest weekly gain since November 2024. On Friday, USD/JPY closed at 153.46. Although the yen retreated 0.5% intraday, its upward momentum remained unstoppable. It rose 2.3% against the euro, its strongest weekly gain in a year, and also climbed approximately 2.7% against the pound, completely overturning pre-election market expectations that a victory for Sanae Takashi would trigger a sell-off. ⑵ Following Sunday's election results, Japanese stocks surged, and government bonds and the yen rose in tandem, forming a vote of confidence in Takashi's loose fiscal policy. She clearly pledged responsible policy and excluded new debt issuance. SMBC's Chief Foreign Exchange Strategist, Hirofumi Suzuki, stated that the election ended the political turmoil that began last July, and the short-covering wave may still have room for further gains. (3) Increased stock market volatility this week drove funds into low-yield safe-haven currencies such as the Japanese yen and Swiss franc. The Swiss franc rose 0.8% this week, holding steady at 0.7695. Rabobank strategist Jane Foley emphasized that the Swiss franc is the only safe-haven currency that meets the textbook definition—fiscal soundness, current account surplus, institutional credibility, and ample liquidity. In contrast, while the Norwegian krone and Swedish krona have surged 5.3% and 3% respectively since the beginning of the year, their lower trading volume makes them difficult to replace. (4) The Reserve Bank of Australia's hawkish stance supports the Australian dollar's leading position among G10 currencies this year. It fell slightly by 0.3% to 0.7073 on Friday, but still rose nearly 0.9% for the week. The US dollar index is expected to fall 0.7% for the week, as seemingly strong labor market data concealed signs of weak hiring, weakening the narrative of economic resilience. (5) The market is holding its breath awaiting US inflation data. Currently, interest rate futures are pricing in two rate cuts in 2026, with the first likely to occur in July. Commonwealth Bank strategist Carol Kong stated that unless there are unexpected data releases, the US dollar may remain in consolidation in the short term. Whether the yen can break through the political premium and realize structural appreciation depends on the interplay between Sanae Takashi's fiscal discipline commitments and the stickiness of spring inflation.