The Japanese yen rose in Asian markets on Thursday against a basket of major and minor currencies, extending its gains for a fourth consecutive day against the US dollar and reaching its highest level in two weeks, as safe-haven buying of the currency gained momentum amid political uncertainty in Japan.

Local media reports indicated that Prime Minister Shigeru Ishiba was preparing to announce his resignation to take responsibility for the ruling partys sweeping defeat in the House of Councillors elections.

The Price

The yen strengthened as the dollar fell 0.45% to 145.85 its lowest level since July 10 down from todays opening at 146.50, with an intraday high of 146.52.

The yen had already risen by about 0.1% against the dollar on Wednesday, marking a third consecutive daily gain, following the announcement of a major trade agreement between Japan and the United States.

Political Developments

Prime Minister Shigeru Ishiba denied plans to resign after local media had reported his intention to step down over the ruling partys severe election loss.

I strongly shared a sense of crisis with former prime ministers, but I have not discussed resigning at all, Ishiba stated.

Opinions and Analysis

Carol Kong, currency strategist at the Commonwealth Bank of Australia, said the yen will continue to face headwinds due to persistent political uncertainty.

We still dont know what Prime Minister Ishiba intends to do so I think there remains some ambiguity surrounding Japans fiscal outlook and the Bank of Japans policy, Kong added.

Interest Rate Outlook

Market pricing for a potential 25-basis-point rate hike by the Bank of Japan at next weeks meeting remains steady below 35%.

Investors are awaiting further data on inflation, unemployment, and wage levels in Japan before reassessing those odds.

The large trade deal between Japan and the United States has given the Bank of Japan added flexibility to raise interest rates before the end of the year.