Yen's Plunge and Political Turmoil Shake Global Currency Markets

The yen faced its most significant weekly drop in a year as markets reacted to dwindling expectations of further rate hikes by the Bank of Japan. Investors expressed concern over incoming Prime Minister Sanae Takaichi's stance on economic policies, anticipating governmental intervention due to the yen's rapid decline.

While Takaichi aims to become Japan's first female prime minister, her comments on monetary policy failed to bolster investor confidence. The currency strategist at the Commonwealth Bank of Australia speculated that Takaichi's leadership might make it challenging for the Bank of Japan to implement rate increases, further pressuring the yen.

Compounding global currency dynamics, the euro faced declines due to political instability in France, as President Emmanuel Macron searches for a new prime minister amidst financial challenges. The unrest has benefitted the U.S. dollar, which saw notable gains despite looming Federal Reserve rate cuts.

(With inputs from agencies.)