Dollar Weakens as Fed Rate Cut Expectations Grow Amid U.S. Shutdown and Trade Tensions
The U.S. dollar continued its downward slide on Friday, pressured by renewed trade tensions, a prolonged government shutdown, and growing expectations that the Federal Reserve could deliver another round of interest rate cuts before the year ends. The dollar index hovered near 98.23, on track for a 0.6% weekly decline, its steepest in nearly three months, as investors grew wary of the economic fallout from Washington’s political gridlock and slowing growth indicators.
Analysts say the extended U.S. government shutdown, which has disrupted key economic data releases, is fueling uncertainty about the strength of the world’s largest economy. “It’s really hard to find a bullish scenario for the dollar index,” said Dilin Wu, research strategist at Pepperstone. “Instead of betting on any single currency, investors are moving into gold, cryptocurrencies, and other assets as a hedge against risk and potential debasement.”
Against major currencies, the greenback weakened broadly, slipping 0.2% to 150.12 yen, while the euro rose 0.1% to $1.1701 and the British pound gained to $1.3446. The yen extended gains after Bank of Japan Governor Kazuo Ueda hinted that a rate hike could be possible if inflation and growth expectations remain on track, signaling a cautious but notable shift in Japan’s ultra-loose monetary stance.
Back in the U.S., the Federal Reserve appears increasingly divided over the path forward. Fed Governor Christopher Waller voiced support for another rate cut later this month, citing mixed labor market data, while newly appointed Governor Stephen Miran, an advisor to President Donald Trump, pushed for more aggressive easing. The Fed’s Beige Book, released earlier in the week, painted a worrying picture of rising layoffs and declining spending among middle- and lower-income Americans.
Adding to the dollar’s woes, trade frictions between Washington and Beijing have resurfaced, with China accusing the U.S. of “stoking panic” over its rare earth export controls. As investors look for safe havens, gold and cryptocurrencies surged, with bitcoin climbing 0.6% to $108,534.66 and ether up 1.8% to $3,919.71, underscoring the growing flight from traditional fiat currencies amid economic uncertainty.
source: cnbc