Yen slides after Japan PM Ishiba resigns
By Rae Wee
SINGAPORE (Reuters) - The yen fell broadly on Monday following news that Japanese Prime Minister Shigeru Ishiba had resigned, while the dollar was nursing losses after tumbling on a weak U.S. jobs report that cemented expectations for a Federal Reserve rate cut this month.
Focus for markets on Monday will also be on French Prime Minister Francois Bayrou's confidence vote, which he is expected to lose, plunging the euro zone's second-largest economy deeper into political crisis.
Japan's Ishiba on Sunday announced his resignation, ushering in a potentially lengthy period of policy uncertainty at a shaky moment for the world's fourth-largest economy.
The yen slumped in response in Asia trade on Monday, falling 0.6% against the dollar to 148.25.
The Japanese currency similarly slid to its lowest in more than a year against the euro and sterling at 173.91 and 200.33, respectively.
Investors are focusing on the chance of Ishiba being replaced by an advocate of looser fiscal and monetary policy, such as Liberal Democratic Party (LDP) veteran Sanae Takaichi, who has criticised the Bank of Japan's interest rate hikes.
"The probability of an additional rate hike in September was never seen as high to begin with, and September is likely to be a wait-and-see," Hirofumi Suzuki, chief currency strategist at SMBC, said of the BOJ's next move.
"From October onward, however, outcomes will in part depend on the next prime minister, so the situation should remain live."
Concerns over political uncertainty prompted a selloff in the yen and Japanese government bonds (JGBs) last week, sending the yield on the 30-year bond to a record high. [JP/]
"With the LDP lacking a clear majority, investors will be cautious until a successor is confirmed, keeping volatility elevated across yen, bonds and equities," said Charu Chanana, chief investment strategist at Saxo.
"Near-term, that argues for a softer yen, higher JGB term-premium, and two-way equities until the successor profile is clear."
Former Japanese foreign minister Toshimitsu Motegi said he would run in the race to decide the next head of the LDP, Kyodo reported on Monday.
The yen hardly reacted to Monday's data, which showed Japan's economy expanded much faster than initially estimated in the second quarter.
SEPTEMBER FED CUT BAKED IN
The dollar was recouping some of its heavy losses, helped in part by the yen's weakness, after falling sharply on Friday on data that showed further cracks in the U.S. labour market.
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