The Japanese yen fell on Monday after Prime Minister Shigeru Ishiba resigned, stoking policy uncertainty in the world's fourth-largest economy. The US dollar was also weak after the August jobs report showed a sharp slowdown, raising expectations of a Federal Reserve interest rate cut this month.
In France, Prime Minister Francois Bayrou is expected to lose a confidence vote, adding to the political crisis in the eurozone's second-largest economy. The euro strengthened against the yen, while Japanese stocks rose even as long-term bond yields remained near record highs. Investors are waiting to see who will replace Ishiba, with LDP veteran Sanae Takaichi being touted.
The market is now pricing in a strong chance of the Fed cutting interest rates, with 10% expecting a bigger cut of 50 basis points. August non-farm payrolls data showed job growth fell sharply, with the unemployment rate rising to 4.3%, the highest in nearly four years. The dollar continued to be under pressure, with the US dollar index falling below 98.
In Washington, President Trump is reportedly considering a successor to Jerome Powell after repeatedly criticizing the Fed for refusing to cut rates as much as he wanted. Meanwhile, commodity currencies such as the Australian and New Zealand dollars also rose, reflecting cautious but mixed sentiment in global markets.
