On Monday, Japan’s yen leveled off after a sharp rise, as the country’s next prime minister indicated that monetary policy would remain supportive to the economy.
Meanwhile, currencies tied to commodities, like the Australian and New Zealand dollars, reached their highest levels of the year due to investor optimism about a potential recovery in China’s economy.
The yen had surged on Friday when Shigeru Ishiba, a former defense minister who has been critical of loose monetary policy, won leadership of Japan’s ruling party, setting him up to become prime minister.
The yen touched a one-week high of 141.75, but further gains were limited after Ishiba stated that monetary policy should stay supportive, considering Japan’s economic conditions.
Analysts suggested this was enough to slow the yen’s rise, and they noted that a possible snap election, which Ishiba hinted at, might weaken the yen in the short term.
Ray Attrill from National Australia Bank said that an election could delay any major decisions from the Bank of Japan until December, which might slightly hurt the yen.
Elsewhere, the euro and British pound held steady, with traders looking to U.S. jobs data and European inflation data due later in the week for clues on future interest rate cuts.
The Australian and New Zealand dollars hit 2024 highs, boosted by hopes of China’s economic recovery following stimulus measures and rate cuts.
The Australian dollar rose 0.5% to $0.6941, a 20-month high, and the New Zealand dollar increased by 0.5% to $0.6375, its best level in over a year.
Last week, a U.S. inflation report showed moderate inflation at 2.2%, which led to lower U.S. yields and a weaker dollar.
Commonwealth Bank of Australia strategist Joe Capurso predicted that the dollar would continue to weaken over the next year, benefiting global markets and commodity currencies like the Australian dollar.
China’s stimulus measures spurred a rally in its stock market, with the yuan gaining strength. The yuan briefly traded below the key 7-per-dollar mark offshore on Friday and hovered around 7.0129 in onshore trade on Monday.
