The Japanese yen rose in European trade on Friday away from three-month lows against the US dollar, amid active short-covering, while US 10-year treasury yields slowed down.

Despite the gains today, the yen is still heading for a weekly loss, ahead of the Japanese parliamentary elections during the weekend, with opinion polls indicating the governing LDP could lose its majority.

The Price

The USD/JPY pair fell 0.25% today to 151.45 yen per dollar, with a session-high at 152.10.

The yen closed up 0.6% against the dollar on Thursday, the first profit in four sessions away from a three-month low at 153.18.

US Yields

US 10-year treasury yields fell 0.85% today away from three-month highs at 4.260%, in turn pressuring the greenback.

The decline comes as the odds of a 0.25% Federal Reserve interest rate cut in November surged once more.

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in November stood at 96%, with a 4% chance of no changes in policies.

A smaller long-term yield gap between Japan and the US would boost demand on Japanese bonds, in turn underpinning the yen.

Weekly Trades

This week, the yen is down 1.5% so far against the dollar, about to mark the fourth weekly loss in a row.

Japanese elections

Recent opinion polls in Japan showed the current governing coalition could lose its majority after the weekend vote, which could complicate political risks and monetary plans.

Many analysts believe that if the Liberal Democratic Party lost its majority, itll likely impede the Bank of Japans efforts to normalize the monetary policy, which would drag the yen down.