FOREX-Yen pushes towards best week in a year on 'Buy Japan' talk

By Sophie Kiderlin

LONDON, Feb 12 (Reuters) - The Japanese yen pushed towards its biggest weekly gain in a year on Thursday, adding pressure on the dollar and suggesting a shift in mood may be afoot in the currency market.

The yen JPY= is up around 2.5% on the dollar since Prime Minister Sanae Takaichi's Liberal Democratic Party swept to a landslide victory at Sunday's election, and if its strength holds through to Friday it would mark the largest weekly rise since February 2025.

Following three straight sessions of gains, the yen was last slightly lower against the dollar at around 153.43 on Thursday, after having hit 152.25 earlier in the session. A break below resistance at 152.05 would signal a change in momentum for a currency that has spent years sliding in response to low interest rates and budget worries.

"It's Japan buying," said Naka Matsuzawa, chief strategist at Nomura Securities in Tokyo, with the yen - rather than the euro - turning into the favoured avenue for bets on a falling dollar and to back Takaichi's plans to revitalise the economy.

That's a change from pre-election selling on nerves about how her government planned to fund its pro-growth policies.

"Foreigners are buying both stocks and bonds," Matsuzawa said. "With a stronger government, the market hopes for higher growth ... If you look over the next 12 months, it might be we see a stronger yen together with stocks higher."

The yen has also made significant headway against crosses, rising around 1.9% on the euro EURJPY= so far this week.

Positioning data JPYNETUSD= showed that as of last week, speculators had a modest net short yen position, so recent gains have probably been boosted by some of those bets being unwound.

The threat of intervention around 160 to the dollar also has markets expecting that downside yen risks are protected.

DOLLAR UNDER PRESSURE

The yen's strength is reverberating across global markets.

"Given that the yen is rallying, it is placing some downside pressure on the dollar," said Nick Rees, head of macro research at Monex, noting that this was happening to a greater extent than expected ahead of Japan's election.

U.S. economic data is also playing into the dollar story this week.

Traders have been inclined to take strong pieces of U.S. economic data as a cue to expect a broader brightening in global growth and as a positive for non-dollar currencies - so the dollar got little boost from surprisingly strong U.S. labour data.

However, Rees said the headline payrolls print was probably inflated by one-off factors, including better weather at the start of the month boosting construction employment and the share of jobs added in health and social care.

"You strip that out, actually the underlying job gains across the rest of the private sector in the U.S. are much, much less spectacular," he said, noting that tempered the dollar's initial jump after the data.

Against a basket of currencies, the dollar was slightly lower on Thursday. U.S. jobless claims are due later in the day before inflation figures on Friday.

Elsewhere, the Australian dollar AUD= has been on a tear as the central bank has hiked rates and flagged the possibility of more to come as it combats inflation. It touched a three-year peak at $0.7147 on Thursday before steadying. AUD=

China's yuan continued a remarkably steady rise, with Lunar New Year demand for cash pushing it higher. It surpassed the key 6.90 per dollar mark for the first time in 33 months on Thursday.

The euro EUR= was last 0.1% higher against the dollar, with the pound GBP= inching 0.15% higher against the greenback even as data showed that the UK economy barely grew in the last quarter of 2025.