US equities surge to new records fueled by AI optimism. The yen plummets due to Japan’s new political leader. The New Zealand dollar weakens ahead of the RBNZ meeting.
Bullish tone prevails in S&P 500, US dollar extends gains
Key takeaways
- AI optimism fuels rally: US equities kicked off the week strongly, with the S&P 500 and Nasdaq 100 hitting fresh record highs, driven by renewed enthusiasm for AI and OpenAI’s major partnership with AMD.
- Political shifts move FX markets: The yen slumped nearly 2% as Japan’s new LDP leader, Takaichi, may prefer a dovish monetary policy stance, while France’s political uncertainty briefly weighed on the euro.
- NZD under pressure: The New Zealand dollar weakened ahead of the RBNZ meeting, with markets expecting another 25 bps rate cut.
The US stock market began the week on a bullish note, buoyed by renewed optimism surrounding the Artificial Intelligence (AI) productivity narrative. Market sentiment was further lifted after generative AI leader OpenAI announced a major partnership with chipmaker Advanced Micro Devices (AMD) to develop advanced AI infrastructure aimed at scaling up OpenAI’s operations.
On Monday, 6 October, the mega-cap S&P 500 and Nasdaq 100 rallied by 0.4% and 0.8% respectively, to hit another fresh all-time high. The small-cap Russell 2000 also posted a positive performance, notching its second consecutive record high with a gain of 0.4%, while the Dow Jones Industrial Average underperformed with a loss of 0.1%.
In the FX market, the US Dollar Index rebounded by 0.4% driven by political upheaval in Japan and France. The weekend election of fiscal and monetary dove Takaichi as the leader of the LDP ruling party in Japan, and she is likely to become Japan's new prime minister, driving the yen down by almost 2% to hit a two-month low of 150.35 against the US dollar.
In France, the shock resignation of Sebastien Lecornu as prime minister triggered an initial sell-off in the euro, as it dropped by 0.5% on Monday to hit an intraday low of 1.1652, a retest of the previous low of 25 September 2025, before partially trimming its losses to close at 1.1713.
In today’s Asia session, the US dollar remained firm, with the US Dollar Index extending its gains through an intraday rise of 0.2%. The strength was primarily driven by weakness in the New Zealand dollar, which fell 0.4% against the greenback at the time of writing.
The current weakness in the NZD is likely to be driven by an anticipation for a continuation of a dovish monetary policy stance by the New Zealand central bank, RBNZ, as the consensus is calling for another rate cut of 25 basis points in tomorrow’s monetary policy meeting
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