U.S. Dollar Strengthens as Economic Concerns Rise and Hopes Grow for End to Government Shutdown

The U.S. dollar strengthened in early Asian trading on Monday as investors weighed weak global economic data against signs of progress in U.S. government funding talks. The dollar index, which measures the greenback’s performance against six major currencies, rose 0.2% to 99.740, snapping a three-day losing streak as both the yen and the euro weakened.

Market sentiment improved after Senate Majority Leader John Thune signaled that bipartisan negotiations to reopen the U.S. government were making headway. The Senate is expected to vote soon on a proposal to fund the government through January, potentially ending the record-long shutdown that has strained consumer confidence and growth. Tony Sycamore, market analyst at IG in Sydney, noted that the dollar’s retreat late last week is likely to reverse with this renewed optimism.

Last Friday’s data showed the University of Michigan’s consumer sentiment index fell to its lowest level in nearly three and a half years, reflecting the toll of the shutdown. “The consumer confidence data was a shocker,” said Sycamore. “This progress toward reopening the government could help repair the damage.”

Against the yen, the dollar rose 0.3% to 153.82 yen after Japanese Prime Minister Sanae Takaichi announced plans to revise the nation’s fiscal targets, easing its stance on spending. Meanwhile, the Bank of Japan’s latest report suggested Japan’s economic outlook is improving.

Elsewhere, the euro slipped 0.1% to $1.155, while the British pound dropped 0.2% to $1.314. The offshore yuan held steady at 7.1261 per dollar. The Australian dollar edged up 0.1% to $0.6502, and the New Zealand dollar eased 0.1% to $0.5626.

Analysts at Standard Chartered warned that Asia’s growth may slow as export momentum fades, while Fed futures indicate a 67% chance of a 25-basis-point rate cut in December—factors likely to keep the U.S. dollar supported in the near term.