S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico MarketUSD/JPY faces a volatile month as Japan prepares for a snap election on 8 February, with outcomes potentially swaying the yen depending on LDP gains and policy expectations, ING’s FX analyst Chris Turner notes.
Political uncertainty keeps USD/JPY on edge
“It is hard to have a conviction call on USD/JPY right now. It seems the Japanese lower house will be dissolved next week and a snap election will be held on 8 February. The playbook assumes that any big improvement in the LDP’s fortunes is a yen-negative on the view that looser fiscal and monetary policy will be favoured and more likely. What constitutes a big improvement for the LDP? Probably a 34-seat gain such that the LDP party itself commands a simple majority.”
“However, we have all been surprised by Japanese politics before. And there is little concern that now the former LDP coalition party (Komeito) has teamed up with the main opposition party (CDP), the opposition could offer stiffer resistance. An LDP failure to convert PM Takaichi’s strong popularity ratings into more seats could end up sending USD/JPY lower again.”
“There’s also the FX intervention threat, and one outlandish idea we presented in this month’s FX Talking was that of joint Fed-BoJ intervention to sell USD/JPY, which would be a game-changer. Suffice to say that USD/JPY looks like a volatile story over the next month and that even at 8.5%, one-month traded USD/JPY volatility does not seem especially expensive.”
