The US dollar rose against most major currencies on Wednesday, climbing alongside gold in a broad risk-off rally, while both the euro and yen came under pressure.
The US government shutdown entered its second week as Republicans and Democrats continued to prioritize potential political gains over resolving the underlying disputes. Some faint calls for renewed negotiations on healthcare-related issues have emerged, but earlier hopes of ending the shutdown within 11–15 days are fading.
Meanwhile, political uncertainty in Japan intensified following Sanae Takaichi’s weekend victory in the ruling party election. Market attention has now shifted to the Japanese parliament’s (Diet) vote to confirm her appointment as the next prime minister.
However, complications have reportedly emerged in negotiations between the Liberal Democratic Party (LDP) and its coalition partner, Komeito. If this gridlock persists, Takaichi’s political future could be at risk — and alternative leadership options may arise.
This renewed uncertainty drove the USD/JPY pair above 151.93 for the first time since February 14, prompting speculation that verbal interventions could return to curb yen weakness.
Analysts believe that if the LDP–Komeito negotiations succeed and parliament formally confirms Takaichi as prime minister, the dollar’s upward momentum against the yen could partially reverse.
By 11:44 GMT, the US dollar index had risen 0.3% to 98.8, after hitting a session high of 98.9 and a low of 98.5.
Macron Seeks an Exit from France’s Political Crisis
In France, the situation remains equally complex as President Emmanuel Macron continues to search for a viable resolution to the ongoing political turmoil.
If the latest efforts by outgoing Prime Minister Sébastien Lecornu to form a new government fail, early parliamentary elections may become the default scenario.
However, a newly elected but fragmented parliament would likely prolong the current deadlock.
French sovereign bonds remain under pressure, with 10-year yields trading near Italian levels — about 85 basis points above German Bunds.
Speculation is growing that the continued instability could lead to early presidential elections. Macron, who cannot seek re-election in 2027, is believed to be weighing a strategic move to preserve his political influence, potentially setting the stage for a comeback in 2032 — a plan that could begin taking shape as early as 2026.
Gold and Dollar Benefit from Global Uncertainty
Gold has been one of the biggest winners amid recent political and financial turbulence, surpassing $4,000 per ounce and hitting a record high of $4,040. This pushed year-to-date gains to roughly 53%.
However, some analysts warn that gold’s dramatic outperformance — as the world’s leading safe-haven asset — could signal distortions in global market dynamics.
At the same time, the US dollar has continued its broad advance this week, reflecting a classic flight-to-safety pattern as cryptocurrencies reversed their recent rally.
US equities, meanwhile, traded with relative calm, supported by persistent investment flows into artificial intelligence, which have helped temper investor anxiety.
Still, several strategists note that a short-term correction in major US indices remains possible, particularly if the government shutdown drags on. Ironically, a few negative trading sessions could provide the political pressure needed to restart funding negotiations.
Busy Calendar Despite Lack of US Data
With key economic data releases halted due to the shutdown, market focus today turns to Federal Reserve officials’ remarks and the minutes of the September Federal Open Market Committee (FOMC) meeting.
At least four Fed members — most of them hawkish — are expected to speak later today. The absence of dovish language could weigh on fragile market sentiment.
Nevertheless, markets are already pricing in a 95% probability of a 25-basis-point rate cut in late October. This suggests that even if the meeting minutes lean hawkish, traders may largely dismiss them and remain focused on the likelihood of two consecutive rate cuts in upcoming meetings.
