Yen Performance: Impact on Dollar and Global Financial Markets

Yen’s Resurgence and Market Implications

By Tom Westbrook and Sophie Kiderlin

Factors Behind Yen Strength

SINGAPORE, Feb 12 (Reuters) – A resurgent yen pushed towards its biggest weekly gain in more than a year on Thursday, adding pressure on the dollar and suggesting a shift in mood may be afoot in the currency market.   

Impact on the Dollar

The yen is up around 2.8% on the dollar since Prime Minister Sanae Takaichi’s Liberal Democratic Party swept to a landslide victory at Sunday’s election, and if its strength holds through to Friday it would mark the largest weekly rise since November 2024.

Global Market Reactions

A fourth straight session of gains pushed the yen as high as 152.25 per dollar, and it was last just below 153. A break below resistance at 152.05 would signal a change in momentum for a currency that has spent years sliding in response to low interest rates and budget worries.

“It’s Japan buying,” said Naka Matsuzawa, chief strategist at Nomura Securities in Tokyo, with the yen – rather than the euro – turning into the favoured avenue for bets on a falling dollar and to back Takaichi’s plans to revitalise the economy.

That’s a change from pre-election selling on nerves about how her government planned to fund its pro-growth policies.

“Foreigners are buying both stocks and bonds,” Matsuzawa said. “With a stronger government, the market hopes for higher growth … If you look over the next 12 months, it might be we see a stronger yen together with stocks higher.”

The yen has also made significant headway against crosses, rising over 2% on the euro so far this week.

Positioning data showed that as of last week, speculators had a modest net short yen position, so recent gains have probably been boosted by some of those bets being unwound.

The threat of intervention around 160 to the dollar also has markets expecting that downside yen risks are protected. 

DOLLAR UNDER PRESSURE

The yen’s strength is reverberating across global markets. 

“Given that the yen is rallying, it is placing some downside pressure on the dollar,” said Nick Rees, head of macro research at Monex, noting that this was happening to a greater extent than expected ahead of Japan’s election. 

U.S. economic data is also playing into the dollar story this week. 

Traders have been inclined to take strong pieces of U.S. economic data as a cue to expect a broader brightening in global growth and as a positive for non-dollar currencies – so the dollar got little boost from surprisingly strong U.S. labour data.

However, Rees said the headline payrolls print was probably inflated by one-off factors, including better weather at the start of the month boosting construction employment and the share of jobs added in health and social care.

“You strip that out, actually the underlying job gains across the rest of the private sector in the U.S. are much, much less spectacular,” he said, noting that tempered the dollar’s initial jump after the data. 

Against a basket of currencies, the dollar was last slightly lower on Thursday. U.S. jobless claims are due later in the day before inflation figures on Friday. 

Elsewhere, the Australian dollar has been on a tear as the central bank has hiked rates and flagged the possibility of more to come as it combats inflation. It touched a three-year peak at $0.7146 on Thursday before pulling back slightly.

China’s yuan continued a remarkably steady rise, with Lunar New Year demand for cash pushing it higher. It surpassed the key 6.90 per dollar mark for the first time in 33 months on Thursday.

The euro was last 0.11% higher against the dollar, as was the pound even as data showed that the UK economy barely grew in the last quarter of 2025. 

(Reporting by Sophie Kiderlin and Tom Westbrook; Editing by Shri Navaratnam, Sonali Paul and Kate Mayberry)