The U.S. dollar weakened on Monday as investor optimism grew over a potential end to the prolonged government shutdown. The dollar index, which measures the greenback against six major currencies, slipped 0.1% to 99.643 following the Senate’s decision to advance a funding measure that could keep the federal government open through January. Market analysts say this move helped ease concerns after recent weak economic data.
“This is just in the nick of time,” said Tony Sycamore, market analyst at IG in Sydney. “The retreat we saw in the U.S. dollar at the end of last week likely continues now.” Consumer sentiment had recently dropped to its lowest in more than three years, signaling that households were feeling the impact of the ongoing shutdown. The prospect of reopening the government appears to be a relief to markets.
Prediction markets reflect the optimism. On Polymarket, the implied probability that the shutdown would end before November 15 surged to 92%. Analysts note that a resolution could prevent further damage to consumer confidence and stabilize economic sentiment, which has been rattled by the record-long shutdown.
Globally, the dollar’s performance varied. It rose 0.2% against the Japanese yen after Prime Minister Sanae Takaichi signaled more flexible fiscal spending. Meanwhile, the euro and British pound weakened slightly, trading at $1.1559 and $1.3148, respectively. The offshore Chinese yuan remained steady at 7.1204, while the Australian dollar and New Zealand dollar saw modest gains.
Traders are also reassessing U.S. interest rate expectations. The yield on 10-year Treasury notes rose to 4.1356%, while futures indicate a slightly reduced probability of a December rate cut. Analysts caution that global liquidity and economic growth trends in Asia and elsewhere could influence the dollar’s performance in the coming months, suggesting potential further gains despite the recent softening.
source: cnbc