SINGAPORE – October 10, 2025 – The Japanese Yen stabilized slightly on Friday but remains poised for its sharpest weekly decline in a year, a move triggered by fast-receding expectations for a near-term interest rate hike by the Bank of Japan (BOJ). Simultaneously, the Euro was anchored near two-month lows as investors monitored political instability in France.
The Yen edged up 0.2% to trade at 152.7 per U.S. dollar, holding near the multi-month weak levels it touched on Thursday. The currency is currently on track for a significant 3.5% drop this week, marking its largest weekly depreciation since October of last year.
Political Shift Weighs on Yen
The drastic drop in the Yen has been primarily driven by concerns that the BOJ may not move to hike interest rates again this year following the surprise victory of “fiscal dove” Sanae Takaichi to lead the ruling party. Takaichi, who is on course to become Japan’s first female prime minister, stated on Thursday that while the BOJ is responsible for monetary policy, any decision must align with the government’s economic goals.
This political shift has stoked worries that Japanese authorities may be forced to intervene to support the beleaguered currency. Japanese Finance Minister Katsunobu Kato expressed concern on Friday regarding “excessive volatility” in the foreign exchange market, echoing Takaichi’s earlier statement that she did not want to trigger excessive declines in the Yen.
“Markets are still of the view that Takaichi’s leadership will make it politically difficult for the Bank of Japan to raise interest rates,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
Traders have adjusted their outlook, now pricing only about a 45% chance of a rate hike from the BOJ at its December meeting, with a full 25 basis point hike not fully priced in until March of next year.
Euro Under Pressure from French Politics
Meanwhile, the Euro remained rooted near two-month lows as the market braced for further political fallout in France. Traders are anticipating the confirmation of France’s sixth prime minister in less than two years, a revolving door that has fueled anxiety over the country’s political stability and fiscal outlook. The uncertainty has kept bearish pressure on the common currency, diverting attention from recent supportive data in the Eurozone.
