Yen Ease as Election Tension Weighs In

The yen eased on Friday as CPI figures were released as expected and investors became cautious with the oncoming snap polls in October that would challenge Prime Minister Shinzo Abe.

In Japan, household spending rose 0.2%. The results beat the fall of 0.2% seen in the month of August and up 0.6% this year, below the expected 0.6% gain. The CPI of the country for August rose 0.7% as expected this year for national CPI.

USD/JPY traded at 112.58, up 0.25%, while AUD/USD fell 0.10% to 0.7848. The trade between EUR/USD fell 0.03% to 1.1784.

Japanese Prime Minister Shinzo Abe called for a snap election as the main opposition Democratic Party led by Yuriko Koike, Tokyo’s popular governor, gave it support behind a fledging party in the Oct. 22 vote. Abe now faces defections from his LDP party ahead of polls and opposition-minded voters.

Similar to the possible outcome of the snap election, the euro has struggled this week after the German election’s unexpected outcome.

The dollar’s gains against a basket of currencies are more pronounced in comparison with the local currency which has worsened in recent days. The yen stood at ¥112.82 with the dollar after hitting a three-month high of ¥113.26 yesterday.

Strategists noted a change in leadership in Japan could affect the yen and risk appetite.

Labor Market Adjustment

Department of Labor

The dollar fell earlier this week before it rose on Thursday as weakness in the labor market offset data shows the U.S. economy growing in the second quarter faster than the expected pace.

The labor market report showed the rising number of Americans filing for unemployment benefits as unemployment came in steady at 2.8% and retail sales increased 1.7% which is below the 2.6% increase seen this year.

The U.S. Department of labor released a report on Thursday imposing that the initial jobless claims increased 12,000 to a seasonally attuned 272,000 for the week until Sept. 23.

The reports came hours ahead of speeches by Fed officials Stanley Fischer and Esther George. The continued interest rate increases was pointed out by George to be the best way to ensure the current economic recovery remains on track.

“Further gradual adjustment in short-term interest rates based on an economy growing above trend … will be important if we want to continue this long expansion,” George stated.

The decline in the greenback made Sterling and the euro as the main beneficiaries. The euro rose for the first time in three days, pairing recent losses.

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