The pound and the yen came under strain on Wednesday, weighed down by renewed investor concerns over global fiscal health and political uncertainty in Japan.

In the previous session, traders offloaded long-dated government bonds in Europe and the United States as attention turned once again to rising debt burdens in major economies. This rekindled worries that governments were losing control of their budget deficits. Britain’s gilt market was particularly hard hit, with 30-year borrowing costs climbing to their highest level since 1998. That left sterling exposed, and it slipped more than 1% on Tuesday before trading 0.12% lower at $1.3378.

“It’s a Europe-wide issue,” said Ray Attrill, head of FX research at National Australia Bank. “France faces similar problems, but in the UK it resonates more because of the memory of the Liz Truss episode. Markets are concerned about the upcoming autumn statement and whether the government will take credible steps to tackle the deficit and the rapid build-up of debt.”

In Japan, the yen was also weaker, down 0.2% at 148.62 per dollar after a 0.8% slide the day before. The move followed the announcement by Hiroshi Moriyama, secretary general of the ruling party and close aide to Prime Minister Shigeru Ishiba, that he planned to resign. His departure could affect Ishiba’s already fragile position following an election defeat.

“Political uncertainty, and the chance that Prime Minister Ishiba may resign in the coming days or weeks, is clearly weighing on the yen,” noted Kit Juckes, chief global FX strategist at Société Générale.

Sanae Takaichi, among the frontrunners to succeed Ishiba, is widely seen as favouring ultra-low domestic interest rates, adding further pressure on the currency.

The weakness in sterling and the yen buoyed the dollar, which rose 0.66% on Tuesday and last stood at 98.44 against a basket of currencies. The euro edged 0.1% lower to $1.1630, extending its earlier fall, while the Australian dollar slipped 0.1% to $0.6514 and the New Zealand dollar was 0.14% lower at $0.5857.

Beyond fiscal and political risks, traders are closely watching this week’s series of U.S. labour market data releases, culminating in Friday’s non-farm payrolls report. The figures are expected to help guide Federal Reserve policymakers on the likelihood of a rate cut later this month.

On the bond front, the two-year U.S. Treasury yield, a gauge of short-term rate expectations, eased slightly to 3.6495% on Wednesday. The 30-year yield, however, hovered just below 5%, mirroring the broader global surge in long-dated bond yields.

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