The Japanese yen headed for its largest weekly gain in more than a year on Thursday, increasing pressure on the dollar and signaling a possible shift in sentiment across currency markets.

The yen has risen about 2.8% against the dollar since the Liberal Democratic Party, led by Prime Minister Sanae Takaichi, won a landslide victory in Sunday’s election. If the currency maintains its strength through Friday, this would mark its biggest weekly advance since November 2024.

A fourth consecutive session of gains pushed the yen to a high of 152.25 per dollar before it last stabilized slightly below 153. A break above resistance at 152.05 is seen as a momentum shift for a currency that spent years weakening due to low interest rates and budget concerns.

Naka Matsuzawa, chief market strategist at Nomura Securities in Tokyo, said: “These are Japan-buying bets,” noting that the yen — rather than the euro — has become the preferred vehicle for positioning for a weaker dollar and for supporting Takaichi’s plans to stimulate the economy.

This marks a shift from the pre-election selloff that had been driven by concerns over how the government would finance its pro-growth policies.

Matsuzawa added: “Foreign investors are buying both stocks and bonds. With a stronger government, markets hope for higher growth… Looking at the next 12 months, we could see a stronger yen alongside rising equities.”

The yen also posted notable gains against other currencies, rising more than 2% against the euro so far this week.

Positioning data showed that as of last week, speculators held modest net short positions in the yen, meaning recent gains may have been amplified by the unwinding of some of those bets.

In addition, the threat of official intervention near the 160 yen-per-dollar level has led markets to believe downside risks for the yen are somewhat protected.

The Dollar Under Pressure

Yen strength has spilled over into global markets.

Nick Rees, head of macro research at Monex, said: “With the yen rising, it is putting some downward pressure on the dollar,” adding that this is happening at a faster pace than expected before the Japanese election.

US economic data are also influencing dollar moves this week.

Traders have tended to interpret strong US economic data as a sign of broader global growth improvement and positive for non-dollar currencies — limiting the dollar’s benefit from stronger-than-expected US employment figures.

However, Rees noted that the headline jobs reading may have been inflated by temporary factors, including improved early-month weather that boosted construction hiring, along with a higher share of job gains in healthcare and social services.

He said: “If you strip out these factors, core job gains across the rest of the US private sector are much weaker than they appear,” which reduced the dollar’s initial jump after the data release.

Against a basket of currencies, the dollar edged slightly lower in the latest Thursday trading. US jobless claims data are due later, ahead of inflation figures on Friday.

Other Currencies

Elsewhere, the Australian dollar extended a strong rally after the central bank raised interest rates and signaled the possibility of further increases as part of its inflation fight. The currency touched a three-year high at $0.7146 on Thursday before easing slightly.

The Chinese yuan also continued its steady advance, as Lunar New Year–related liquidity demand pushed the currency above 6.90 per dollar for the first time in 33 months on Thursday.

The euro rose 0.11% against the dollar in the latest trading, and the British pound also advanced, despite data showing the UK economy barely grew in the fourth quarter of 2025.

Gold prices declined in European trading on Thursday, pulling back from a two-week high due to correction and profit-taking activity, in addition to pressure from the rebound in the US dollar following strong US labor market data.

Those data reduced the likelihood that the Federal Reserve will cut US interest rates next March. To reprice those expectations, investors are awaiting the release of key US inflation data tomorrow, Friday.

Price Overview

Gold prices today: Gold prices fell by 0.8% to $5,045.23, from an opening level of $5,084.18, and recorded a session high at $5,100.38.

At Wednesday’s settlement, gold prices rose by 1.2% and recorded a two-week high at $5,119.21 per ounce, due to renewed geopolitical tensions between the United States and Iran.

The US Dollar

The dollar index rose by 0.1% on Thursday, continuing attempts to recover from a two-week low, reflecting a rebound in the US currency against a basket of major and secondary currencies.

This rebound comes after the release of strong US labor market data, which reduced the chances of a near-term interest rate cut by the Federal Reserve.

US Interest Rates

The US economy added more jobs than expected last December, with the unemployment rate declining and average hourly earnings rising.

Following those data, and according to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the March meeting rose from 79% to 95%, while pricing for a 25-basis-point rate cut declined from 21% to 5%.

To reprice these expectations, investors are closely monitoring the release of more US economic data, in addition to tracking comments from Federal Reserve officials.

Key US inflation data for January are due tomorrow, Friday, which will provide decisive evidence about the path of US interest rates this year.

Gold Outlook

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said gold retreated from above $5,100 and silver from above $86 after stronger-than-expected US jobs data reduced expectations for an imminent Federal Reserve rate cut, which lifted the dollar.

Hansen added that the renewed focus on incoming economic data points to a form of stabilization after the recent rise in volatility, while the upcoming Lunar New Year holiday in China could weaken risk appetite and liquidity.

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed ETF, increased on Wednesday by about 2.0 metric tons, bringing the total to 1,080.32 metric tons, the highest level since February 4.

The British pound declined in European trading on Thursday against a basket of global currencies, extending its losses for the third consecutive day against the US dollar, amid a rebound in the US currency following the release of strong US new jobs data.

Sterling is also pressured by strong expectations that the Bank of England will cut interest rates in March. To reprice those expectations, investors are awaiting important UK economic growth data due later today.

Price Overview

• British pound exchange rate today: The pound fell against the dollar by 0.1% to $1.3616, from the opening level at $1.3629, and recorded a session high at $1.3642.

• The pound lost 0.1% on Wednesday against the dollar, marking its second consecutive daily loss, after the release of strong economic data in the United States.

The US dollar

The dollar index rose on Thursday by 0.1%, within attempts to recover from a two-week low, reflecting improved levels of the US currency against a basket of major and minor currencies.

This rebound comes after the release of strong US labor market data, which reduced the likelihood that the Federal Reserve will cut US interest rates in the near term.

Following the January jobs report and according to the CME FedWatch tool: pricing for keeping US interest rates unchanged at the March meeting rose from 79% to 95%, while pricing for a 25 basis point rate cut fell from 21% to 5%.

UK interest rates

• After the Bank of England meeting last week, traders increased their bets on resuming the monetary policy easing cycle and cutting interest rates.

• Market pricing for the probability that the Bank of England will cut UK interest rates by 25 basis points at the March meeting is currently steady above 60%.

Economic growth

To reprice the above probabilities, investors are waiting later today for UK economic growth data, which is expected to have a strong impact on the Bank of England’s monetary policy path.

At 07:00 GMT, monthly GDP is due, expected to grow by 0.1% in December from 0.3% growth in November. At the same time, the preliminary quarterly GDP reading is expected to show growth of 0.2% in Q4 2025 from 0.1% in Q3.

Expectations for the British pound

We expect here at Economies.com: if UK growth data come in weaker than market expectations, the probability of a Bank of England rate cut in March will rise, leading to further losses in the British pound.

The Japanese yen rose in Asian trading on Thursday against a basket of major and minor currencies, extending its gains for the fourth consecutive day against the US dollar and recording its highest level in two weeks, amid a strong wave of buying driven by easing financial concerns in Japan.

In addition to the shift in focus from spending to growth, traders are betting that the landslide parliamentary election victory of Prime Minister Sanai Takaichi puts her in a strong position to pursue more fiscally responsible policies and gives her greater ability to control downside risks in government bonds.

Price Overview

• Japanese yen exchange rate today: The dollar declined against the yen by 0.6% to ¥152.22, the lowest level since January 28, from today’s opening level at ¥153.22, and recorded a session high at ¥153.44.

• The yen ended Wednesday’s trading higher by about 0.75% against the dollar, marking its third straight daily gain, amid a strong buying wave after the landslide parliamentary election victory of the Liberal Democratic Party led by Prime Minister Sanai Takaichi.

Financial concerns

Takaichi’s landslide victory gave investors greater confidence in her ability to push growth-supportive fiscal policies and ease cost-of-living pressures, while at the same time placing her in a position to use stimulus tools more responsibly.

There is little doubt that Takaichi’s expected adoption of more coherent economic policies will reduce financial concerns and strengthen confidence in the overall economic path, and that stimulus measures will support deficit control and contain public debt growth.

Expectations for the Japanese yen

• Naka Matsuzawa, chief strategist at Nomura Securities in Tokyo, said: “These are purchases by Japanese investors,” as the yen — not the euro — has become the preferred choice for investment outside the United States.

• Yosuke Miyairi, FX and rates strategist at Nomura, said the dollar/yen exchange rate could follow the narrowing interest rate differentials between the United States and Japan and fall toward 150 if investors see Takaichi becoming more fiscally responsible.

Japanese interest rates

• Market pricing for the probability that the Bank of Japan will raise interest rates by a quarter percentage point at the March meeting is currently steady below 10%.

• In order to reprice those probabilities, investors are awaiting further data on inflation, unemployment, and wages in Japan.