Asian Markets Slip as Political Turmoil and U.S. Shutdown Push Gold to Record $4,000

Asian stocks fell on Wednesday, following Wall Street’s downturn, as investors reacted to political instability in France and Japan alongside the deepening U.S. government shutdown. The prolonged closure in Washington sent shockwaves through global markets and drove gold prices to a record high of $4,000 per ounce, reflecting heightened safe-haven demand.

The Japanese yen hovered near eight-month lows at 152.33 per dollar, down over 3% for the week — its steepest decline in a year. Investors awaited fiscal policy signals from Prime Minister-in-waiting Sanae Takaichi, whose unexpected victory over the weekend raised concerns about Japan’s fiscal direction. Analysts now expect the next rate hike to be delayed until 2026, weakening the yen further and sparking speculation of possible intervention by Japanese authorities.

In France, political chaos deepened after Prime Minister Sebastien Lecornu’s resignation, putting pressure on President Emmanuel Macron to either resign or call a snap election. The euro slipped 0.26% to $1.1628, its lowest in a month. The turmoil weighed on the broader MSCI Asia-Pacific index, which dropped 1%, retreating from a 4½-year high. Markets in China and South Korea remained closed for holidays, while Japan’s Nikkei gained 0.35%, just shy of its record peak.

Meanwhile, the U.S. dollar index climbed to its highest level since August, supported by the yen’s weakness and euro’s decline, though sentiment was muted amid the ongoing government shutdown entering its eighth day.

In commodities, gold soared past $4,000, up over 50% this year, as traders priced in 45 basis points of U.S. rate cuts in 2025. Thierry Wizman of Macquarie Group called gold’s rally a hedge against a potential “AI tech boom collapse” and a warning of inflationary risks tied to global debt.

The New Zealand dollar also dropped 1% after the central bank’s surprise 50-basis-point rate cut, signaling concern over its fragile economy.