Dollar softens as Japan election lifts Nikkei to records

The dollar eased as markets reacted to Japan’s election landslide, which pushed the Nikkei sharply higher to fresh record levels. Japanese equities rallied on expectations of policy stability and reflation, while government bond yields rose on concerns about heavier debt-funded spending. The yen saw a modest rebound after pre-election selling, while European currencies slipped from recent highs. Elsewhere, risk sentiment steadied with silver firmer and Bitcoin consolidating.

Equities

The FTSE 100 closed higher on Friday, ending the session up 0.6% and securing a second consecutive weekly gain. Gains in heavyweight banks provided support into the close, helping the index finish the week on firmer ground despite continued weakness in some technology-related names. The more domestically focused FTSE 250 also ended Friday higher, rising 0.5%, though it still recorded a second straight weekly decline.

Within the FTSE 100, RELX shares closed nearly 4% lower late on Friday, extending a fourth consecutive weekly fall as concerns around data and software businesses continued to weigh on sentiment. London Stock Exchange Group also ended the session lower, down around 0.7%, marking its third weekly decline in a row. Major lenders helped lift the index, with Lloyds Banking Group, NatWest Group and Barclays all closing higher by the end of trading on Friday.

Mining stocks also contributed positively. Fresnillo closed higher on Friday after a strong session for precious metals-related shares. Elsewhere in the UK market, Metlen shares fell more than 20% at the close after the Greek energy and metals group warned that its 2025 EBITDA would be materially lower than previously expected. Shares in Next edged higher late on Friday after the retailer confirmed it had acquired footwear brand Russell & Bromley for £2.5 million.

In the US, equity markets closed sharply higher on Friday, led by a strong rally in technology stocks. The Dow Jones Industrial Average ended the session above 50,000 for the first time, while the S&P 500 and Nasdaq Composite also closed firmly higher after three sessions of losses earlier in the week.

Chipmakers dominated US trading. Nvidia shares closed almost 8% higher on Friday, lifting the wider semiconductor sector as investors focused on increased spending plans for artificial intelligence infrastructure. Advanced Micro Devices and Broadcom also ended the session significantly higher. By contrast, Amazon shares closed sharply lower after the company flagged a substantial increase in capital spending tied to artificial intelligence data centres.

Forex & Commodities

Early on Monday, currency markets were led by a firmer Japanese yen, which turned higher in Asian trading after the election victory of Japan’s new prime minister, Sanae Takaichi. The move came after several days of weakness and left the yen trading at 156.5 per US dollar by the morning session. Tokyo officials reiterated that they are closely monitoring currency moves, underlining ongoing sensitivity around sharp swings. Against other major peers, the yen also moved up from recent lows, easing pressure seen late last week.

The US dollar softened at the start of the week, with the dollar index lower in early trade at 97.38. Attention is firmly on a busy US data calendar, including delayed employment figures, inflation data and retail sales, all due later this week. Markets are weighing whether recent signs of strain in the labour market will influence the policy outlook at the Federal Reserve, where futures continue to imply a modest chance of a rate cut at the March meeting. The dollar also edged down against the offshore Chinese yuan, trading near 6.926.

Sterling was little changed late on Monday, holding around $1.362, as investors followed political developments in the UK surrounding Prime Minister Keir Starmer. The British currency showed limited reaction in the absence of fresh domestic economic data.

In commodities, spot gold extended its rally early this morning, trading just above $5,005 per ounce, supported by the softer dollar and expectations that US interest rates may ease later this year. Silver also moved higher, while platinum and palladium traded lower in the same session.

Oil prices moved down late on Monday, with Brent crude at $67.21 a barrel and US crude at $62.73, after the US and Iran agreed to continue indirect talks over Tehran’s nuclear programme. The easing of immediate supply concerns offset lingering geopolitical risks in the Middle East and renewed focus on European proposals to restrict services linked to Russian oil exports.

Economic Calendar

• ECB President Christine Lagarde speaks
• ECB Executive Board member Philip Lane speaks
• Bank of England policymaker Catherine Mann speaks
• Fed Governor Christopher Waller speaks
• Atlanta Fed President Raphael Bostic speaks