The Japanese yen fell in Asian trading on Monday against a basket of major and minor currencies, extending its losses for a second straight session versus the US dollar and recording a two-week low, after remarks by Prime Minister Sanae Takaichi highlighting the benefits of a weaker domestic currency.

The US dollar continues to advance in the foreign exchange market, supported by broad investor approval of Donald Trumps nomination of Kevin Warsh as the next Federal Reserve chair.

In addition, the yen remains under further negative pressure as expectations for a Japanese interest rate hike in March continue to fade, especially with easing inflation pressures on policymakers at the Bank of Japan.

Price overview

The USD/JPY exchange rate rose by 0.5% today to 155.51 yen, the highest level since January 23, up from Fridays close at 154.75 yen, and recorded an intraday low at 154.75 yen.

The yen ended Friday down 1.1% against the dollar, marking its second daily loss in the past three sessions, amid continued correction and profit-taking from a three-month high at 152.09 yen, after weaker-than-expected core inflation data from Tokyo.

Over January as a whole, the Japanese yen gained 1.35% against the US dollar, posting its first monthly rise since August, supported by growing speculation about coordinated intervention by US and Japanese monetary authorities in the FX market.

US dollar

The dollar index rose 0.15% on Monday, extending gains for a second straight session and hitting a one-week high, reflecting continued strength of the US currency against a basket of global peers.

This advance comes as markets welcomed President Donald Trumps nomination of Kevin Warsh to lead the Federal Reserve, a move that reinforced confidence about the future direction of monetary policy.

Expectations have increased that the Fed may adopt a more hawkish stance in tackling inflation, prompting traders to add to long dollar positions against major and minor currencies.

John Higgins, chief economist at Capital Economics, said the market reaction to Trumps nomination of Kevin Warsh as Federal Reserve chair broadly aligns with the view that the president made a relatively safe choice.

Higgins added that the prevailing impression is that Warsh is not fully under presidential influence and is unlikely to undermine Federal Reserve independence or intensify concerns about currency depreciation.

Sanae Takaichi

Japanese Prime Minister Sanae Takaichi said on Saturday that a weak yen has positive aspects, in comments that appeared to contrast with repeated Finance Ministry warnings about possible intervention to support the currency.

In a campaign speech ahead of next weeks election, Takaichi said that despite criticism of yen weakness, it represents a valuable opportunity for export sectors from food industries to automobiles, noting that currency depreciation has acted as a buffer against US tariffs and provided tangible support to the economy.

A poll by Asahi newspaper showed Takaichis ruling party is likely to secure a strong victory in the upcoming lower house elections.

Japanese interest rates

Market pricing for a quarter-point rate hike by the Bank of Japan at the March meeting is currently below 10%.

To reprice those expectations, investors are waiting for more Japanese data on inflation, unemployment, and wages.

Yen outlook

Tony Sycamore, market analyst at IG, said the snap election on February 8 is likely to be the next key domestic catalyst for the yen.

He added that a Liberal Democratic Party majority win could push USD/JPY toward 160, while a coalition outcome could keep the pair near the 155.00 level, depending on the coalition partners.