Currencies Latest Market News: Japanese Prime Minister’s Resignation Shakes FX Markets
Estimated reading time: 5 minutes
- Japanese Prime Minister’s resignation caused significant FX market volatility.
- Initial Yen weakening reversed as risk appetite improved.
- Broad US dollar weakness benefited other major currencies.
- Political news, not economic data, dominated market sentiment.
- Shift from “flight to safety” to “risk-on” environment.
Contents
- Currencies Latest Market News: Japanese Prime Minister’s Resignation Shakes FX Markets
- Sudden Political Shift in Japan Triggers Volatility
- The Impact of Ishiba’s Resignation Was Felt Beyond the Major Currency Pairs
- What to Watch Next
Sudden Political Shift in Japan Triggers Volatility
The resignation of Japanese Prime Minister Ishiba late on September 8th, 2025 (UTC), sent shockwaves through global foreign exchange (FX) markets, triggering significant price movements across major currency pairs. The news, initially causing a sharp weakening of the Japanese Yen (JPY) against the US Dollar (USD), quickly reversed as risk appetite improved, leading to a broad decline in the US Dollar Index (DXY) and gains in other major currencies. The event highlights the significant impact unexpected political developments can have on global financial markets.
The initial reaction to the news saw the USDJPY pair spike to 148.40, a 70-pip increase from its level of 147.70 prior to the announcement, reflecting uncertainty surrounding Japan’s political future. However, this initial JPY weakness was short-lived. As the Nikkei 225 stock index surged to a new record high, suggesting a positive market response to the potential for new leadership and stimulus, the USDJPY reversed course and fell to 147.20. This shift underscored the rapid change in market sentiment from fear of political instability to optimism about potential policy changes.
The broad US dollar weakness, as measured by the DXY, resulted in considerable gains for other major currencies. The EURUSD pair, already trending upwards, broke above the 1.1700 level, marking an increase of approximately 70 pips from Friday’s lows and a 0.6% jump from approximately 1.1630. Similarly, the GBPUSD surged through the 1.3500 level, reaching its highest point since July and showing a 0.5% increase. Risk-on sentiment also boosted the Australian and New Zealand dollars, with the AUDUSD approaching 0.6600 and the NZDUSD reclaiming the 0.5900 level. These movements reflect a broader shift in investor confidence towards riskier assets, as the initial uncertainty surrounding the Japanese political situation gave way to optimism.
The Impact of Ishiba’s Resignation Was Felt Beyond the Major Currency Pairs
The impact of Ishiba’s resignation was felt beyond the major currency pairs. While specific data releases had minimal direct influence on FX moves on September 9th, 2025, the focus remained firmly on the political news and its implications. InvestingLive’s Asia-Pacific FX news wrap and the economic calendar summary from RTT/Fx TradingCharts both confirm the absence of major top-tier economic data releases that could have independently caused the FX movements observed. This suggests that the political news dominated the market narrative, driving the observed changes in currency values and overall risk sentiment. InvestingLive’s economic calendar for Tuesday, September 9th, 2025 further reinforces this, indicating a lack of major data that would have impacted FX markets on its own.
The initial reaction of markets reflected concern regarding political uncertainty. However, this quickly shifted to a risk-on environment as the potential for a new government to introduce stimulus measures and implement economic reforms became apparent. This positive sentiment drove a surge in equity markets, further fueling the shift away from safe-haven assets like the USD and JPY towards higher-yielding currencies such as the EUR, GBP, AUD, and NZD. The fall in both UST and JGB yields supports this interpretation, reflecting a decrease in demand for safe-haven bonds as investors shifted towards riskier assets.
The Collinson FX wrap summarizes the market action and levels, providing a comprehensive overview of the day’s events. The rapid shift in market sentiment, from an initial flight to safety to a strong risk-on rally, underscores the significant impact of unexpected political news on global currency markets and the interconnectedness of FX and equity markets. This situation highlights the importance of keeping abreast of global political events for all FX traders and investors.
What to Watch Next
- The unveiling of Japan’s new leadership and potential policy announcements.
- The market reaction to any initial statements or policy proposals from the new government, particularly regarding monetary policy and economic stimulus.
- The overall global risk sentiment in the coming days, as this will influence the continued strength of higher-yielding currencies.
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FAQ
What were the initial market reactions to the resignation?
