文字のサイズ
- 小
- 中
- 大
Hedge selling to defeat the ruling party, but the dollar/yen revalues
Last week was a week of unabated dollar strength, easily breaking through milestones and rising.
The Jiji Press reported that the support rate for the Ishiba Government was 28%, and the Asahi Shimbun reported that the Liberal Democratic Party’s majority in the public sector was delicate, leading to selling of the dollar against the yen as a hedge against a defeat for the LDP. However, there was a strong appetite for buying on the downside, with the dollar easily switching to around 152 yen.
The Nikkei 225 sold off immediately after the close on fears that the Liberal Democrats would lose their majority, and the ‘buy the election’ anomaly was broken. The polls show that the autocrats and the public may have a delicate majority, but as electoral cooperation between the opposition parties has not progressed, they may not lose significantly. The US presidential election will have a greater impact than the lower house election. The Nikkei and the dollar/yen have been moving in opposite directions, and the market has become a place where conventional wisdom does not apply. The dollar/yen rally this time is severely affected by the fact that it is accompanied by a fall in the Nikkei. To begin with, it is hard to believe that the 10-year US interest rate will even exceed 4% amid a rate cut, but when it reaches 4.2%, we are again surprised at the strength of the US economy.
This is the so-called Trump market, which tilted towards Trump’s election after candidate Harris failed to deliver a speech in the US presidential election. But the euro and the pound did not fall much, and it was the yen that moved noticeably, so we see the yen’s depreciation adding to the dollar’s strength. Both Japanese government bonds and the Nikkei 225 were sold, so it could be said that it was a week of selling Japan. The move appears to have been driven by concerns about the impact of the US-China conflict on the Japanese economy now that Trump is President.
The situation in the Middle East is becoming more chaotic, with Hamas supreme leader Shinwar killed and Netanyahu’s private residence under drone attack from Hezbollah. North Korea is deepening its military ties with Russia, and the world is becoming far from stable. Gold prices are also high.