SINGAPORE (Reuters) – The yen hit a three-month low on Monday as Japan’s ruling party lost its majority in parliament, while oil tumbled after Israel’s weekend strike on Iran bypassed oil and nuclear targets.
Japan’s Nikkei, after initially falling, rose 1.6% and the yen fell 0.5% to 153.3 per dollar, following the ruling Liberal Democratic Party’s (LDP) weakest election performance since 2009 in Japan.
Brent crude futures were 4.2% lower, trading as low as $67.80 a barrel, after Israel’s response to an Iranian missile attack has so far focused on missile factories and other sites near Tehran rather than disrupting of the energy supply. [O/R]
In Japan, the LDP, which has ruled for most of the post-war years, and junior coalition partner Komeito won 215 seats in the House of Commons in Sunday’s elections, public broadcaster NHK reported.
This falls well short of the 233 needed for a majority, and the yen was under pressure as investors believed that any government that emerged would likely make a dovish change in economic policy. [.T][FRX/]
“Markets are likely to think this spells more trouble for the yen with 155 as an initial price target and (the Treasury) line in the sand at 160,” Bob Savage, head of markets strategy and insights at BNY, said in a note.
Gains in the stock market, which often move in the opposite direction to the yen as a weaker currency can help exporters, were led by technology companies.
RISING DOLLAR
Broader currency markets were steady, putting the dollar on track for its biggest monthly gain in 2.5 years, as signs of strength in the US economy and the prospect of a Donald Trump presidency have pushed US yields sharply higher.
At 4.23%, the yield on 10-year government bonds rose by 43 basis points through October, compared to an increase of 16 bp for 10-year government bonds and 23 bp for government bonds.
According to CME’s FedWatch tool, markets see virtually no chance of a rate cut by the Federal Reserve at its November meeting, compared to a 50% chance of a 25 basis point cut a month ago.
The euro held steady at $1.0796 on Monday, falling 3% through October. The New Zealand dollar has lost almost 6% during the month, also under pressure from a dovish central bank and disappointing stimulus plans from China.
Elsewhere, US stock futures rose 0.5% in early trading ahead of a big week of earnings and data.
Five of the “Magnificent Seven” group of mega-cap companies will report: Google parent Alphabet, Microsoft, Facebook owner Meta, Apple and Amazon.
The Nov. 1 U.S. jobs report comes as investors wonder whether a stronger-than-expected economy could lead to fewer interest rate cuts, with inflation data looming in Europe and Australia.
Weekend data showed China’s industrial profits fell 27.1% in September from a year earlier.
Gold, which hit record highs last week, hovered just below that level at $2,736 an ounce.
(This story has been refiled to correct a typographical error in paragraph 3)
(Reporting by Tom Westbrook; Editing by Christopher Cushing)
