LONDON :The dollar rose on Thursday, adding to a strong run this week, helped by a weakening euro facing a political crisis in Paris and a struggling yen amid a change of guard in Japan’s ruling party.
Markets this week have also grappled with a lengthening U.S. government shutdown.
The euro has been struggling following the resignation of France’s Prime Minister Sebastien Lecornu and his government earlier this week. But President Emmanuel Macron still surprised markets with plans to appoint a new prime minister this week.
The single currency last traded 0.2 per cent lower at $1.1609, after touching its lowest level since the end of August on Wednesday. It is down almost 1 per cent this week so far.
Similarly, the yen has been under pressure this week after hardline conservative Sanae Takaichi was picked as head of Japan’s Liberal Democratic Party, putting her on course to become the country’s first female prime minister and fuelling bets of a revival in big spending and loose monetary policy.
The Japanese currency was last down 0.27 per cent at 153.07 per dollar, levels last seen in February. It has fallen more than 3.8 per cent for the week thus far.
“In the absence of U.S. data, FX markets have largely focused on French and Japanese politics,” said Chris Turner, head of markets at ING.
“President Macron could announce a new PM by Friday evening. This has come as a surprise to a market that had felt that the next chapter in the French political saga could only be new and divisive elections,” he said, adding that the news has helped the euro find some support.
The moves in the yen and the euro have in turn provided support for the dollar, which rose to a two-month high, last up 0.20 per cent to 99.038.
Federal Reserve officials agreed at their recent policy meeting that risks to the U.S. job market had increased enough to warrant a rate cut. But they remained wary of high inflation amid a debate about how much borrowing costs were weighing on the economy, minutes of their September meeting showed on Wednesday.
A prolonged U.S. government shutdown could leave the Fed flying blind at its October meeting as economic data is delayed.
Still, investors continue to price in a 25 basis point cut for its next meeting.
