Last week, the dollar-yen temporarily reached 156 yen, a level not seen in four months.
This might give the impression that the yen weakening trend from July has resumed.
In my contributions to Seren, I have repeatedly emphasized that the dollar-yen exchange rate has two components – dollar and yen – and it’s crucial to determine which factor is dominant.
Currently, as explained over the past few weeks, the main factor is dollar strength, primarily due to Trump’s victory and Republican control of both houses of Congress – the “Triple Red” results in the U.S. election.
Another point worth noting is that the euro-yen has actually shown slight “yen strength,” moving from 165 yen on November 5 (U.S. presidential election day) to 162 yen on the 15th (while the yen weakened against the dollar from 151 to 154 during the same period).
The focus of dollar strength appears to be shifting from the yen to the euro.
Why is this happening? Because the market always targets the “weakest link.”
