Yen Seen Getting a Boost as Japan Political Uncertainties Mount
(Bloomberg) -- The yen is expected to gain some strength as political uncertainty in Japan spurs local investors to reduce buying riskier assets overseas. At the same time, the prospect of a new premier may give foreign funds more reason to funnel money into the country.
Prime Minister Yoshihide Suga said last week he would resign this month after a year in office, and two opinion polls suggested former Foreign Minister Taro Kono is the favorite to become the country’s next leader. The yen has room to appreciate as it is the cheapest Group-of-10 currency in terms of its real-effective-exchange rate after Norway’s krone, according to data compiled by Bloomberg.
“Given that the yen is effectively quite cheap right now, there are expectations that somebody like Kono, who is seen as reform-minded, may encourage foreign investors to buy the yen to purchase Japanese stocks,” said Tohru Sasaki, head of Japan markets research at JPMorgan Chase & Co. in Tokyo.
Sasaki said the bias for yen appreciation may send the currency toward the higher end of its recent ranges. The yen advanced to a two-month high of 108.72 early last month. It traded at 109.79 per dollar on Monday.
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