The dollar fell to a one-week low against major currencies on Wednesday due to a U. S. government shutdown, which raised concerns in the markets and could delay important jobs data critical for Federal Reserve decisions. The shutdown began after the Senate did not approve a short-term spending bill that would have kept the government running until November 21. The Senate was scheduled to vote again on a similar House-passed measure.
The dollar index, which measures the U. S. currency against six major peers, dropped 0.2%. There were signs of safe-haven buying in the markets, benefiting low-yield currencies like the Japanese yen and Swiss franc, while U. S. Treasuries and gold remained stable. Rabobank’s chief currency strategist noted that it was unclear if the yen’s strength was due to safe-haven demand or speculation about the Bank of Japan raising interest rates.
The dollar declined by 0.5% against the yen and 0.2% against the Swiss franc. President Trump warned Democrats that a government shutdown would allow irreversible actions from his administration regarding significant programs. The Labor and Commerce departments announced that data releases would stop during a partial shutdown, including Friday’s important nonfarm payrolls report, which affects Fed rate decision-making.
On Tuesday, mixed results from the JOLTS report pressured the dollar, highlighting a slight increase in job openings but a decrease in hiring. The market is focused on upcoming private-sector economic indicators, like the ADP employment report. The length of the shutdown may impact markets ahead of the Fed’s policy meeting on October 29. Traders expect a quarter-point rate cut, while the Bank of Japan may raise rates, evidenced by improved sentiment among Japanese manufacturers. Meanwhile, despite a contraction in euro zone manufacturing, the euro rose to one-week highs.
With information from Reuters