Dollar soft

The US dollar nursed steep losses on Tuesday ahead of a slate of economic data that will shape the interest rate path, while the yen held on to its ​gains in the wake of Prime Minister Sanae Takaichi’s resounding election victory.

Sterling was steady in early Asian hours after a ‌volatile Monday as investors weighed the crisis facing Prime Minister Keir Starmer and rising wagers of further rate cuts. It last fetched $1.3682 after rising 0.6 percent in the ‌previous session.

The Japanese yen was at 155.85 per US dollar, holding onto its overnight gains when it firmed 0.8 percent. Verbal warnings from authorities on Monday had helped strengthen the yen after the currency weakened in the immediate reaction to Takaichi’s victory.

Analysts expect the yen to weaken in the long run, noting the spotlight will soon be on Takaichi’s fiscal policies. The yen is down 6 percent since she took charge of the LDP in October.

“With fiscal policy set to loosen further ‌under a bolder Takaichi administration, I think dollar-yen will ultimately resume strengthening, and we continue to forecast dollar-yen to increase to 164 by year-end,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

While ‍the yen had retraced some of its recent losses against other currencies, on Tuesday it was back on a weakening trend against the Swiss franc and the euro.

“For a more sustained move lower, markets will want reassurance that fiscal policy will not become overly loose,” OCBC strategists said in a ​note.

“A firmer, more hawkish tone from the BoJ may also be needed to anchor expectations and drive a more durable decline in ‌USDJPY.”

The euro eased a bit to $1.19 after a 0.85 percent jump on Monday. The dollar index, which measures the US currency against six other units, was at 96.952, hovering near a one-week low.

Analysts said media reports that China has urged local banks to diversify from US Treasuries led to some dollar weakness.