Saturday Oct 18 2025 00:00
2 min
The Yen continued its upward trajectory on Friday, causing the Dollar/Yen pair to fall below the 150 mark, moving away from its eight-month high. The catalyst for this movement was the emergence of non-performing loans in two US banks, sparking a global demand for safe-haven assets.
The Japanese Yen outperformed most of its G10 counterparts, with USD/JPY dropping by over 0.5% to around 149.63 by the time of writing, its lowest level since October 6th. The Swiss Franc also gained ground, while both the US Dollar and US Treasury yields declined amid a sell-off in regional bank stocks.
A week prior, the Yen's exchange rate had fallen to its lowest level since February after Sanae Takaichi was elected head of the Liberal Democratic Party, before experiencing significant volatility following an unexpected collapse of the ruling coalition in Japan.
"USD/JPY is extending losses, tracking US Treasury yields lower amid risk-off sentiment," said Christopher Wong, a foreign exchange strategist at Oversea-Chinese Banking Corporation. "Market focus is also on the formation of the coalition government in Japan, particularly whether the LDP and Nippon Ishin no Kai can reach an agreement."
Political uncertainty has weakened market expectations for a rate hike from the Bank of Japan (BOJ) this month. Nevertheless, BOJ Governor Kazuo Ueda told reporters in Washington on Thursday that if confidence in their economic outlook strengthens, the BOJ will continue to tighten monetary policy, opening the door for a rate hike in the near future.
Strategist Mark Cranfield pointed out that FX traders in 2023 would note that USD/JPY fell about 800 points from high to low during the regional banking crisis back then. A similar scenario this time would mean the pair testing the 146 area lows this month. The key driver is once again the plunge in US Treasury yields, with 2-year US yields having already fallen to 3-year lows. With traders pricing the Fed Funds target rate to hit the 3% area, there is still plenty of room for overshoot on the downside.
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2 min
Saturday, 18 October 2025
2 min
Saturday, 18 October 2025
2 min
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