Political dramas in Japan and France give the dollar a leg upBut ongoing US government shutdown limits gains, supports goldStocks shrug off latest uncertainties amid AI dealmaking activityYen Licks Wounds as BoJ October Hike Seen UnlikelyThe Japanese yen remained under pressure versus the US dollar on Tuesday but was slightly firmer against the likes of the euro and pound, as the initial reaction to the outcome of the weekend’s LDP leadership contest started to fade. Japan’s parliament will likely hold a vote on October 15 to decide whether to appoint Sanae Takaichi as prime minister, following her victory in her LDP party’s race to replace outgoing leader and prime minister Shigeru Ishiba.Markets are betting on Takaichi – a fiscal dove – to implement pro-growth policies and caution the Bank of Japan on hiking interest rates too quickly. The Nikkei 225 index in Tokyo surged by 4.75% to a new all-time high on Monday before pausing for breath today. Meanwhile, rate hike expectations for October have fallen to just 25% from more than 50% a couple of weeks ago.There’s a real risk that markets are overestimating how much stimulus Takaichi will be able to deliver given the mounting national debt and how strongly she will oppose BoJ policymakers in normalizing policy.For now, though, despite the jump in yields yesterday, it looks like there’s still plenty of demand for Japanese government bonds following a successful 30-year debt auction earlier today.When it comes to the yen, however, it will probably take a lot more than verbal intervention to stop the bleeding against the dollar, which hit a two-month high of 150.70 yen. Comments today by Finance Minister Kato about monitoring “excessive fluctuations and disorderly movements” have not had much impact.Dollar Shines Despite Risk of Long Shutdown, Euro StrugglesThe euro is also on the backfoot again amid the political crisis in France, although it’s far from being Tuesday’s worst performer. French President Emmanuel Macron has given Prime Minister Sebastien Lecornu, who unexpectedly resigned yesterday, 48 hours to negotiate with other parties on forming a new cabinet after the one unveiled on Sunday was rejected.French bond yields are up again today, while the CAC 40 is slipping for a second day.There’s no agreement either in the US Senate on passing a stopgap funding bill, with Democrats and Republicans again rejecting each other’s proposals in a fifth vote on Monday. The government shutdown has now entered its seventh day amid some mixed signals from President Trump on the efforts to reach a deal.Hopes were raised yesterday after Trump suggested that the Republicans were in talks with the Democrats on health care. But he later appeared to shift his stance by posting on Truth Social that there won’t be any negotiations on health subsidies until the government has reopened.Nevertheless, the prospect of a prolonged shutdown isn’t making much of a dent in the greenback as US economic prospects are still more favourable than those for most other advanced economies.AI Deals Boost EquitiesThat’s certainly one explanation as to why stocks on Wall Street are continuing to rally. But the bigger factor is the renewed AI frenzy, amid a flurry of dealmaking within the artificial intelligence sector, the latest being the agreement between AMD (NASDAQ:AMD) and OpenAI.The deal involves AMD providing the ChatGPT owner 6 gigawatts of its advanced AI chip and the issue of warrants that could see OpenAI purchasing 10% in the chipmaker. Tesla (NASDAQ:TSLA) shares also rallied on Monday on speculation that the company will announce a cheaper version of its Model Y today.The Nasdaq 100 ended the day 0.8% higher in record territory, while the S&P 500 notched up a record close.Gold Eyes $4,000, Bitcoin Eases From Record HighGold also maintained its winning streak as it hit an intra-day all-time high of $3,977 today before easing back slightly. With the precious metal fast closing in on the $4,000 level, a pullback before reaching that milestone can’t be ruled out.The biggest immediate threats are the shutdown in the US ending in the next few days and more hawkish rhetoric from the Fed, although the latter hasn’t been much of deterrent so far. There are a number of Fed speakers lined up for later in the day, including Bostic, Bowman and Miran.Not to miss out on the fun, Bitcoin scaled a new record peak of $126,223 yesterday, with much of the moves driven by the positive sentiment on Wall Street. However, the popular crypto is down more than 1% today, mirroring the drop in US stock futures.