The U.S. dollar fell on Monday, as growing optimism that Washington’s prolonged government shutdown is nearing resolution reduced demand for safe-haven assets.
At 04:00 ET (09:00 GMT), the Dollar Index, which measures the greenback against six major currencies, was down 0.1% at 99.370, extending mild losses from the previous week.
Shutdown Progress Lifts Risk Sentiment
Investor sentiment improved after the U.S. Senate voted to advance a funding measure that would keep the government operating through January. The move sparked renewed confidence that the 40-day shutdown—the longest in U.S. history—may soon come to an end after weeks of political stalemate.
On the Polymarket prediction platform, the odds of the shutdown ending before November 15 jumped to 92%, reflecting a surge in market confidence.
Economic data continues to show the strain caused by the impasse. The University of Michigan’s consumer sentiment index weakened to its lowest level in nearly three and a half years in early November, while White House economic adviser Kevin Hassett warned that the U.S. economy could contract in the fourth quarter if the shutdown persists.
“While some might argue that the end of the shutdown could be a risk-on, dollar-negative impulse for the FX markets, its impact may be more mixed,” said analysts at ING.
They added, “Late last week, the dollar was under pressure on job layoffs and rhetoric that the U.S. economy could contract in the fourth quarter should the shutdown extend. At the same time, Friday’s release of poor US consumer sentiment data was read as a dollar negative. Progress to end the shutdown may be felt more by risk-sensitive FX cross rates than the dollar.”
Euro Strengthens After ECB Comments
The euro edged higher, with EUR/USD up 0.1% at 1.1579, supported by remarks from European Central Bank Vice President Luis de Guindos, who said the ECB’s current interest rate levels are appropriate unless there are major shifts in economic conditions—implying that further cuts are unlikely in the short term.
De Guindos also noted that the central bank must remain “very prudent and cautious” when setting policy, even as uncertainty has eased following the EU–U.S. trade agreement earlier this year.
The British pound also advanced, with GBP/USD gaining 0.1% to 1.3178, ahead of a week that will feature several important U.K. economic releases.
“We still think the prospects of a December 25bp cut from the Bank of England are underpriced,” ING said. “The market now attaches just a 60% probability to such an outcome. Feeding into the BoE story will be tomorrow’s release of the September wage data. This is expected to slow further and give the BoE greater confidence that inflation is less persistent than first thought.”
Yen Slips After Japan’s Fiscal Remarks
The Japanese yen weakened, with USD/JPY climbing 0.4% to 153.98, after comments from Prime Minister Sanae Takaichi, who said she plans to set a new multi-year fiscal target to enable greater flexibility in government spending, signaling a softening of Japan’s prior fiscal consolidation stance.
Asian Currencies Mixed as Risk Appetite Improves
The Chinese yuan traded slightly firmer, with USD/CNY down 0.1% to 7.1173, after data showed consumer price inflation rose faster than expected in October, while producer prices declined at a slower rate.
Commodity-linked currencies benefited from improved risk sentiment. The Australian dollar rose 0.6% to 0.6532, supported by a rebound in risk assets, while the New Zealand dollar gained 0.3% to 0.5642, as investors turned more optimistic on the global economic outlook.