The yen had been in a constant and progressive rally against the US dollar, as geopolitical risk and global economic uncertainty were taking their toll. The yen is often seen as a global safe haven currency in times of financial crisis. The threat of which had sent USDJPY to a most recent low of 98.975 two weeks ago.
The downward momentum changed radically on Monday after Mr. Abe won the political general elections for a second consecutive term. The Prime Minister has been known for his unorthodox view of economic policies, often referred to as Abenomics. One of the first things Mr. Abe has mentioned is that he still believes in monetary stimulus to get the economy back into fast track.
There are another ¥10 trillion in a stimulus package ready for another round of securities buying.
The Japanese government has already heavily bought shares in Nikkei 250 index companies and more stimulus is on the way. This kind of monetary intervention adds currency to the system and inevitably depreciatesits value. Not surprising then that yen has lost 4.25% since its open on Monday at 100.596 to its close yesterday.
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