The U.S. dollar fell on Wednesday, dropping to a one-week low as investors grew concerned that an extended government shutdown could weigh on economic activity.
At 04:25 ET (08:25 GMT), the Dollar Index, tracking the greenback against six major currencies, was down 0.2% at 97.275, marking its lowest point in a week.
Shutdown in Washington Raises Concerns
Operations across much of the U.S. federal government came to a halt after a last-minute spending bill, supported by Republicans, failed to pass the Senate, facing strong opposition from Democrats.
“There doesn’t appear to be a clear path out of the impasse, and many fear this shutdown could last longer than the budget-related closures of the past given the sharp political differences between the two sides.”
President Donald Trump has used the shutdown to signal additional federal workforce reductions, with over 150,000 employees expected to leave this week after opting for buyouts, the largest such exit in 80 years.
“Investors are fearful that this could be a longer shutdown, which will only weigh further on consumer confidence and job security,” said analysts at ING, in a note.
The shutdown will likely delay Friday’s closely watched nonfarm payrolls report, which investors view as critical in gauging whether the Federal Reserve will cut interest rates at the end of this month. Meanwhile, attention may turn to the ADP National Employment Report, expected to show a modest gain of 50,000 private-sector jobs in September.
Euro Gains on Anticipation of CPI Data
In Europe, EUR/USD rose 0.2% to 1.1757 as markets awaited eurozone inflation data due later in the session, likely showing a rise to 2.2% year-over-year from 2% previously.
Risks remain skewed higher following stronger-than-expected German inflation in September, which increased for the second month in a row, ending the disinflation trend of recent months.
“However, we think the U.S. government shutdown and the softer dollar story should dominate today and could be enough to drag EUR/USD to 1.1800/1820,” said ING.
GBP/USD rose 0.2% to 1.3474 after Nationwide Building Society reported that British house prices increased 0.5% in September, following a 0.1% decline in August. On a year-over-year basis, prices rose 2.2%, slightly above August’s 2.1% but still below wage growth and inflation rates.
Yen and Other Currencies React
USD/JPY declined 0.5% to 147.14, with the Japanese yen benefiting from the dollar’s weakness. The Bank of Japan’s quarterly “tankan” survey, released Wednesday, indicated that confidence at large manufacturers improved for the second consecutive quarter, with firms maintaining positive spending plans.
AUD/USD slipped 0.1% to 0.6607, reversing gains from the previous session after the Reserve Bank of Australia kept interest rates unchanged, pausing after three cuts earlier in 2025 as it balanced inflation risks against signs of cooling economic momentum.
USD/CNY traded largely flat at 7.1196.
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