(Bloomberg) -- Yen selling is accelerating after Japan’s ruling coalition expanded its majority in Sunday’s upper house election held Sunday, with investors interpreting the result as a quasi-referendum on the country’s super-easy monetary policy.
The currency fell as much as 0.8% against the dollar, exceeding the closely-watched 137 level. Bank of Japan Governor Haruhiko Kuroda reiterated Monday that he won’t hesitate to add monetary stimulus if needed to boost the stuttering economy.
A rise in Treasury yields and solid US labor data on Friday also gave an additional boost to the dollar, which climbed against most of its major peers.
“The environment is prone for buying dollars and selling yen given the sense of security that there won’t be turbulence in Japan for a while and amid expectations for Fed rate hikes to combat inflation,” said Tsutomu Soma, a bond trader at Monex Inc. in Tokyo. “It won’t be surprising if dollar/yen tests 147 or 150 in this trend.”
With the BOJ keeping interest rates pinned to the floor even as foreign ones climb, the yen has sunk to a 24-year low, down over 16% against the greenback this year. The currency is just a hair’s breadth away from its worst drawdown ever, according to data compiled by Bloomberg.
Japan’s election came two days after the assassination of former Prime Minister Shinzo Abe, who was seen as a key supporter of the BOJ.
©2022 Bloomberg L.P.
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