HG MARKETS:

The Japanese yen fell on Monday after Japanese Prime Minister Shigeru Ishiba announced his resignation, while the dollar remained weak following Friday’s disappointing U.S. jobs report, which reinforced expectations of a Federal Reserve rate cut this month.

Markets are also watching French Prime Minister Francois Bayrou’s confidence vote, which he is likely to lose. His move has deepened the political crisis in the euro zone’s second-largest economy.

Ishiba’s resignation, announced Sunday, could lead to prolonged policy uncertainty for Japan, the world’s fourth-largest and most indebted industrialized economy.The yen dropped sharply in Asian trading, lifting the dollar by  0.78% before it eased to a 0.1% gain at 147.62. It also fell to more than one-year lows against the euro and sterling, at 173.13 and 199.53, respectively.

Investors are eyeing the possibility of Ishiba being replaced by a pro-stimulus figure like LDP veteran SanaeTakaichi, who has criticized the Bank of Japan’s rate hikes. On Monday, ex-Foreign Minister ToshimitsuMotegi became the first ruling party lawmaker to enter the race to succeed Ishiba, who will remain in office until a successor is chosen.

Japanese stocks surged, while government bonds stayed steady, though super-long JGB yields hovered near record highs. The yen barely reacted to data showing Japan’s Q2 economic growth was stronger than first estimated. The dollar struggled to recover from Friday’s steep drop after data revealed further signs of weakness in the U.S. labor market.

Investors increased bets on a 50-basis-point Fed rate cut later this month, now seeing a 10% chance, up from zero a week ago, per the CME FedWatch tool.Sterling edged up 0.1% to $1.352 after a 0.5% Friday gain, while the euro held steady at $1.1727 after hitting a one-month high.

The dollar index slipped 0.2% to 97.7, after tumbling more than 0.5% Friday.U.S. Treasury Secretary Scott Bessent on Friday called for tighter oversight of the Fed’s rate-setting powers, as the Trump administration steps up pressure on the central bank. President Trump is reviewing three candidates to replace Jerome Powell, whom he has criticized for not cutting rates.

Meanwhile, the Australian and New Zealand dollars each rose 0.5% to $0.6585 and $0.5926, respectively.