FX.co ★ Yen Strengthens on ‘Takaichi Trade’ Unwind

The Japanese yen surged past the 151 per dollar mark on Thursday, marking its third consecutive day of gains. The currency's strength can be attributed to the mounting uncertainty surrounding the potential leadership of Liberal Democratic Party's Sanae Takaichi as Japan's next prime minister, following last week's dissolution of the coalition with the Komeito party. Although the ruling party has suggested an internal leadership vote on October 21st, approval from the opposition remains pending. Investors, who had previously bet against the yen anticipating Takaichi's aggressive fiscal policies and sustained monetary easing, are now retreating from those positions due to the growing political instability. Concurrently, Bank of Japan board member Naoki Tamura advised caution against premature policy tightening, emphasizing the need to prevent a recurrence of stagnant prices and wages. Further bolstering the yen were safe-haven flows and a softer dollar, amidst the backdrop of intensifying US-China trade frictions, the ongoing US government shutdown, and dovish commentary from the Federal Reserve.