Yen's Steep Decline Amidst Japan's Political Shake-Up

The yen stabilized on Friday, yet it remained on track for its most significant weekly drop in a year. This decline comes as expectations for a near-term interest rate hike faded, compounded by a political upheaval in Japan. The yen climbed 0.2% to 152.7 per U.S. dollar, yet it was poised for a massive 3.5% drop, marking its largest dip since October last year.

This rapid fall was ignited by the Bank of Japan's hesitance to raise rates after Sanae Takaichi's unexpected victory to lead the ruling party, raising fears about the necessity of intervention by Japanese authorities. Japan's Finance Minister, Katsunobu Kato, voiced concerns regarding excessive volatility in the foreign exchange market.

In Europe, France's political instability severely impacted the euro, resulting in its biggest weekly decline in 11 months. President Emmanuel Macron's struggles to appoint a stable prime minister are deepening investor worries about France's fiscal health, setting the stage for a turbulent period in European financial markets.

(With inputs from agencies.)