The yen weakened against the dollar in Tokyo morning trading on the 5th, with the rate at around ¥158.35-38 per dollar. It was reported that the Democratic Party had secured majorities in both chambers in the US midterm elections, prompting a move to sell the yen as uncertainty over US politics receded.
In Tokyo foreign exchange trading on the morning of the 5th, the yen opened lower, with the rate at ¥158.35-38 per dollar as of 9:00, marking yen weakness and dollar strength from the previous day. Expectations strengthened that the Democratic Party would regain majorities in both chambers in the US midterm elections, reducing uncertainty surrounding US politics. This prompted stronger dollar buying, while the euro also rose against the yen.
According to estimates by the Associated Press, the balance of power in the US Congress was 54-44 in the Senate and 237-147 in the House, with the Democratic Party expected to hold majorities in both chambers. President Trump indicated a willingness to accept the results, and reports suggested that market caution had eased.
The market moved in response to the results. During Tokyo trading on the 4th, stocks plunged on expectations of a Democratic lead, while dollar/yen fell sharply from the ¥158.60 range to the ¥157.30 range. After the event was fully priced in, the Nikkei Average recovered without falling below ¥60,000. During European trading, the yen weakened again, eventually trading in the upper ¥158 range.
US crude oil futures fell sharply to a low not seen for approximately 1 month. Easing concerns over higher oil prices supported the yen, while the response to US data was limited. With the US employment report still to come, the foreign exchange market is expected to remain volatile, although upward momentum is likely to remain limited.