Dollar Climbs as Yen Slides Amid Japan’s New Leadership and France’s Political Turmoil

The U.S. dollar advanced to its strongest week in almost a year, buoyed by a sharp decline in the Japanese yen and a muted euro following political upheavals in Japan and France.

Japan’s ruling party has seen a dramatic shift after conservative Sanae Takaichi was chosen to lead the Liberal Democratic Party. The move has revived speculation that Japan could return to expansive fiscal spending and a more dovish monetary stance, which has pressured the yen. The currency briefly strengthened to ¥152.49 per dollar after slipping to ¥153 overnight, but it has fallen over 3 % in the current week—its worst performance since September 2024.

"The dollar/yen rally has been relentless and appears unstoppable," said Carol Kong, a currency strategist at Commonwealth Bank of Australia. She added that the confirmation of Takaichi as prime‑minister and the Bank of Japan’s October policy meeting could further weaken the yen, especially if the new leader signals a continuation of loose policy.

In Europe, the euro has been held back by France’s deepening crisis. Prime Minister Sebastien Lecornu’s sudden resignation has left the country in limbo, with President Emmanuel Macron set to appoint a new leader within 48 hours. The single currency edged 0.09 % higher at $1.1639, ending a three‑day losing streak, but remains down 0.9 % for the week.

The dollar’s gains have lifted other major currencies. The British pound rose 0.07 % to $1.3413 after a two‑week low, the Australian dollar climbed 0.11 % to $0.6594, and the New Zealand dollar edged 0.10 % higher to $0.5792 following the Reserve Bank of New Zealand’s 50‑basis‑point rate cut and a cautious outlook on the economy.

Meanwhile, the Federal Reserve’s latest policy meeting signaled that the risks to the U.S. labor market have risen enough to justify a rate cut, while inflation concerns remain high. The minutes underscored a cautious stance on future cuts, yet markets are still pricing in two more rate reductions by year‑end.

Against a basket of currencies, the dollar was essentially flat at 98.77, reflecting the balance between its gains on the back of yen weakness and the muted euro.