Political Turmoil Shakes Currency Markets as Japan and France Face Leadership Changes

The foreign exchange market witnessed substantial fluctuations on Monday, as political developments in Japan and France led to dramatic currency movements. The Japanese yen suffered its most significant drop against the dollar in five months following Sanae Takaichi's expected rise to Japan's prime ministership. With an expansionary fiscal agenda, Takaichi's leadership victory caused traders to revise their assumptions about Japan's monetary policy, impacting currency speculation significantly.

Concurrently, the euro faced downward pressure, declining after Sebastien Lecornu, France's newly appointed Prime Minister, resigned. His abrupt departure has deepened France's political instability, adding to the volatility affecting the euro against various currencies. Analysts suggest the uncertainty in leadership could prolong until French President Emmanuel Macron establishes a new government strategy.

These developments highlight the vulnerabilities of global currency markets to political shifts, compounded by other factors such as the ongoing U.S. government shutdown. The lack of vital economic data from the U.S. is likely to amplify market reactions to administrative comments and policy speculations in the upcoming days.

(With inputs from agencies.)