Dollar Weakens Amid Goverment Shutdown Fears and Anticipation of Jobs Report
teh dollar dipped against major currencies on Monday, reversing some of last week’s gains fueled by stronger-than-expected economic data. Investors are now focused on upcoming labor market figures, hoping for clarity on the Federal Reserve’s future interest rate policy.
Recent economic releases – including positive housing data, durable goods orders, and GDP revisions – alongside a sharp decline in unemployment claims, have led markets to scale back expectations for near-term interest rate cuts. Dealers now anticipate a 42 basis point reduction in US interest rates by December, and a total of 105 basis points by the end of 2026, a decrease of approximately 25 basis points from mid-September expectations.
Adding to the downward pressure on the dollar are concerns about a potential US government shutdown. Financing is set to expire on Tuesday, and a failure by Congress to pass a funding bill could lead to a partial government closure beginning Wednesday, the start of the 2026 fiscal year.
“Clients are largely dismissing the risk of government activity, and are looking at the dollar’s rise last week in anticipation of issuing labor market data that might potentially be weak in the coming days,” noted corbay, Corbay, Corbay, of Toronto.
By the end of morning trading, the dollar had fallen 0.6% to 148.585 yen, despite achieving its best weekly gain since early July. The dollar index, measuring the currency against a basket of six major peers, decreased 0.2% to 97.90, after rising 0.5% last week. The euro gained 0.3% against the dollar, trading at $1.1734.
investors are closely watching for the potential impact of a government shutdown on the release of the crucial non-agricultural jobs report scheduled for Friday.
