Most Asian currencies were little changed on Tuesday as a prolonged U.S. government shutdown dampened risk appetite, while the yen hit two-month lows after the election of fiscal dove Sanae Takaichi as Japan’s ruling party leader.
The US Dollar Index, which measures the greenback against a basket of major currencies, edged 0.1% higher after modest gains on Monday. US Dollar Index Futures were largely unchanged as of 04:30 GMT on Tuesday.
Yen hits 2-mth low as Takichi’s LDP win reduces BOJ hike bets The yen weakened further against the dollar on Tuesday, with the USD/JPY pair hitting a 2-month high of 150.62 yen.
The pair jumped nearly 2% on Monday, after Takaichi secured the Liberal Democratic Party leadership over the weekend. Her victory paves the way for her to become Japan’s next prime minister.
Takaichi, known for her support of aggressive fiscal spending, has criticised the BOJ’s previous attempts to raise interest rates as “stupid” and signalled a preference for looser monetary policy.
Traders swiftly scaled back expectations for further tightening after her election victory.
"Her election was somewhat of a surprise, and the yen’s 2% drop versus USD is a testament to that," ING analysts said in a note.
However, ING analysts added that they see limited upside for USD/JPY, noting that a weaker yen could worsen Japan’s cost of living, strain relations with Washington. They see a break above 150 as temporary rather than the start of a sustained rally.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Asia FX remains muted; Fed meeting minutes eyed Elsewhere in Asia, most currencies traded in tight ranges. Investors remained cautious as the U.S. government shutdown dragged into a second week, delaying key economic data releases and clouding the outlook for Federal Reserve policy.
The Singapore dollar’s USD/SGD edged down 0.1%, while the South Korean won’s USD/KRW pair traded flat.
The Chinese yuan’s offshore pair USD/CNH ticked 0.1% higher. Mailand markets were closed for public holidays.
The Australian dollar’s AUD/USD pair was largely steady.
The Indian rupee’s USD/INR pair ticked 0.1% higher, remaining near record highs reached last month.
"This will probably be another abnormal week in FX, with the pause in most data releases meaning an outsized focus on other macro news," ING analysts said.
"The event with the greatest market impact potential is the release of Fed minutes from the September meeting on Wednesday," they added.
