Yen dented as political uncertainty grips Japan; dollar fragile
The yen eased on Monday after Japanese Prime Minister Shigeru Ishiba announced his resignation over the weekend, while the dollar was on shaky ground as Friday's weak U.S. jobs report cemented expectations of a Federal Reserve rate cut this month.
The focus for markets will also be on French Prime Minister Francois Bayrou's confidence vote later in the day, which he is expected to lose. The announcement of the vote, which Bayrou himself called, has plunged the euro zone's second-largest economy deeper into political crisis.
Japanese stocks surged while government bonds (JGBs) were steady, though yields on super-long JGBs hovered near record highs.
The yen hardly reacted to data on Monday showing Japan's economy expanded much faster than initially estimated in the second quarter.
The dollar struggled to recoup its heavy losses after falling sharply on Friday on data that showed further cracks in the U.S. labour market.
The nonfarm payrolls report showed U.S. job growth plunged in August and the unemployment rate increased to nearly a four-year high of 4.3%.
Investors ramped up bets of an outsized 50-basis-point rate cut from the Fed later this month following the release and are now pricing in a 10% chance of such a move, as compared to none a week ago, according to the CME FedWatch tool.
Sterling edged up 0.1% to $1.3534, having risen more than 0.5% on Friday, while the euro steadied at $1.1725, after hitting a more than one-month high on Friday.
The dollar index edged down 0.2% to 97.7, having tumbled more than 0.5% on Friday.
U.S. Treasury Secretary Scott Bessent on Friday called for renewed scrutiny of the Fed, including its power to set interest rates, as the Trump administration intensifies its efforts to exert control over the central bank.
President Donald Trump is considering three finalists to replace Fed Chair Jerome Powell, whom he has criticised all year for not cutting rates as he has demanded.
Elsewhere, the Australian and New Zealand dollars each rose 0.5% to $0.6585 and $0.5926, respectively.
Source : Reuters
