Japanese Yen trims gains as US Dollar recover from the post-election reversal
- USD/JPY returns above 158.00 after bouncing from session lows at 157.39.
- The US Dollar dropped across the board following news reporting that the Democrats took control of the House and the Senate in the midterm elections.
- The sound US macroeconomic fundamentals and ongoing concerns about the Middle East conflict are providing support to the USD.
The Japanese Yen (JPY ) holds moderate gains against the US Dollar (USD) on Wednesday, but it has given back almost half of the ground taken following news of a sound Democratic victory in the US midterm elections. The USD/JPY trades near 158.15 as of writing after bouncing up from session lows at 157.39, although still below the intraday high, at 158.75.
Investors sold the US Dollar across the board during Wednesday’s Asian session as reports confirmed that the Democrats took control of Congress and also the Senate, which was more disputed, in a massive rebuke to President Donald Trump’s policies.
Fears of tougher AI regulation have spooked investors
Markets expect Democrats to implement regulation in the AI sector and put a brake on data center building. This has rushed investors into the safety of US Government bonds, pushing yields and the US Dollar lower and boosting traditional safe-havens such as the Japanese Yen and the Swiss Franc.
Looking from a wider perspective, however, the US Dollar remains supported by strong fundamentals, which are likely to limit downside attempts. Later on the day, the focus will shift to the US ADP Employment Change Report, which is expected to show a moderate slowdown in employment growth in October, while the ISM Services Purchasing Managers’ Index (PMI) is set to show levels consistent with solid business activity.
Beyond that, the conflict in the Middle East remains in a grey area, despite the ongoing efforts to resume the negotiating process, which keeps Brent Oil well above $100. The US launched a strike on Iranian targets hours before the elections, and Trump has kept the possibility of further strikes alive. Concerns about an all-out war would likely push Oil prices higher and restore the US Dollar’s safe-haven status.
US midterm elections FAQs
The US midterm elections are the federal elections held halfway through a president's four-year term. Voters choose all 435 members of the House of Representatives, about one-third of the Senate, and, in many states, governors and other state and local officials.
Election Day is Tuesday, November 3, 2026. Federal law sets it as the Tuesday after the first Monday in November. Early voting and mail voting are already under way in many states.
They decide which party controls each chamber of Congress for the last two years of President Donald Trump's term. The majority party sets the legislative agenda, chooses committee leaders and, in the Senate, controls confirmations of judges and senior officials.
No. The president is elected every four years; the next presidential election is in November 2028. Midterms are often seen as a referendum on the sitting president's party, which historically tends to lose House seats.
Most analysts expect a modest, short-lived reaction in the US Dollar rather than a lasting trend. A divided Congress is widely seen as the base case and is partly priced in. Treasury yields may react more noticeably to the results. Outcomes that raise expectations of fiscal stimulus tend to lift yields and the US Dollar, while gridlock that limits new spending can pull both lower. Political friction, such as funding or debt-ceiling standoffs, can also briefly lift the Dollar as a safe haven. Over six to twelve months, growth and Federal Reserve policy matter more than the vote.
US stocks have historically been weak before midterms and strong after them. Since 1950, the S&P 500 has been higher 12 months after every midterm election, 19 out of 19, with an average gain of about 15%. Analysts link the pattern to uncertainty fading once results are known. Past performance does not guarantee future returns, and some strategists note that high valuations in 2026 could test the streak.
Markets have often welcomed a divided government because gridlock makes sweeping changes to taxes, spending and regulation less likely. Under a Republican president, the S&P 500 has historically done well in years following midterms that split control of Congress. The risks are funding deadlines, debt-ceiling fights and congressional investigations, which can add short-term volatility.