Following reports that the Democratic Party had secured a majority in the U.S. midterm elections, dollar/yen briefly fell to the low ¥157s before recovering to the ¥158 level. Attention will focus on how the pair moves in light of developments in stock prices and interest rates.
In the Tokyo market, dollar/yen turned lower as the Democratic Party's gains were reported, falling during the day to around ¥157.38. It subsequently recovered to the ¥158.10 level as short covering emerged.
The Democratic Party was expected to secure a majority in both chambers of Congress in the U.S. midterm elections, giving it control over budget drafting and the legislative agenda. Expectations grew that the dollar would face a backdrop of weaker stocks and a weaker dollar.
The Nikkei Stock Average closed at ¥62,188.63, down ¥893.23 from the previous day, after falling as low as ¥60,030.10. Selling following the U.S. midterm election results weighed on the market.
In the outlook for overseas markets, stocks fell, U.S. yields declined and the dollar weakened as the Democratic Party's majority progressed as expected. However, with the outcome increasingly priced in, dollar/yen's decline ran its course and buying resumed. The mid-¥158s around the 200-day moving average is expected to be the next upside target.