Dollar rises as Japan’s pro-stimulus election boosts global markets

The dollar strengthened across all major currencies while global equities held near record highs following the near-certain election of Sanae Takaichi as Japan’s next prime minister, seen as a pro-stimulus leader. Asian shares extended gains, led by technology and chip stocks, as the yen weakened and long-term Japanese government bond yields rose.

Gold, which earlier hit a record after global political tensions, retraced some gains, while investors also sought alternative assets such as Bitcoin, amid concerns over a US government shutdown and political instability in France.

Tech stocks continue to drive the global rally, fueled by AI-related investments. AMD’s latest data center deal and Nvidia’s announced $100 billion investment in OpenAI highlight the surge in demand for AI computing power. Experts warn that total spending on advanced chips and data centers could reach trillions of dollars, raising concerns about a speculative bubble reminiscent of the late-1990s dot-com era.

Meanwhile, Japanese bond futures pared losses after strong demand in a 30-year government bond auction, and options traders showed the lowest bullish sentiment on the yen in over three years. Volatility in Japan’s longer-dated bonds is increasing, with potential spillovers to US and UK markets, according to Goldman Sachs.

Global investors are closely watching the yen, Japanese equities, and AI-driven tech investments as political shifts and technological spending continue to shape market dynamics.