Dollar Hits Year-Low Against Yen as Harris Gains Edge in Presidential Race

The U.S. dollar dropped to its lowest level against the yen this year on Wednesday, after investors boosted the chances of Kamala Harris winning the upcoming U.S. presidential election following a key debate against rival Donald Trump.

The dollar fell as much as 1.24% to 140.71 yen, a level last seen in December 2022, before stabilizing at 141.16 yen. The yen also benefited from remarks by Bank of Japan board member Junko Nakagawa, who indicated that the central bank would raise interest rates if the economy and inflation aligned with its forecasts.

Meanwhile, traders awaited a crucial U.S. inflation report that could influence the Federal Reserve’s next move on interest rates.

Long-term U.S. Treasury yields, which typically influence the dollar-yen pair, also dropped, hitting their lowest point since June 2023 at 3.605%.

The dollar tends to gain strength under a Republican victory due to potential tariffs and increased fiscal spending. However, Wednesday’s sentiment favored safe-haven currencies like the yen and Swiss franc.

Harris gained momentum in the debate, which sparked a boost in her election odds, as well as support from pop star Taylor Swift, who publicly endorsed her. Online betting platforms showed Harris’ chances of winning increasing, while Trump’s dipped.

The broader dollar index fell by 0.22% to 101.43, and the Swiss franc strengthened for a second consecutive day. The euro rose 0.2% to $1.1039, and sterling remained flat despite stagnant UK economic data.

As markets anticipate the Federal Reserve’s meeting on September 18, there is a growing divide among traders about the size of the expected rate cut, with the upcoming CPI report expected to provide more clarity.