The U.S. dollar fell on Thursday as risk appetite improved. The move came after the federal government reopened following a 43-day shutdown. A recent dollar rebound, driven by fading expectations of rate cuts, also continued to lose strength.
The government’s restart ends the longest shutdown in U.S. history. The closure disrupted air travel, reduced food assistance for low-income households, and left over a million federal workers without pay for more than a month.
“Risk has responded positively to the shutdown news, and dollars have been slightly offered,” said Sarah Ying, head of FX strategy at CIBC Capital Markets.
The dollar had also been supported by comments from Federal Reserve Chair Jerome Powell. He noted last month that a rate cut in December is not guaranteed. But that momentum is now fading, Ying added. She said the market is seeing “mean reversion” as expectations adjust.
Traders are now waiting for a wave of economic reports that were delayed during the shutdown. These data points will provide new insight into the health of the economy and the direction of Fed policy.
Federal Reserve officials remain divided on whether rate cuts should continue. Inflation is still elevated, adding uncertainty to the outlook. San Francisco Fed President Mary Daly said risks to the Fed’s goals are now balanced after two cuts this year, but may lean slightly toward labor-market concerns.
Futures markets show a 52% chance of a December rate cut.
Dollar Index Declines to 99.22
The dollar index, which tracks the greenback against major currencies like the euro and yen, fell 0.26% to 99.22. The euro rose 0.28% to $1.1624, its highest level since October 30. The dollar also weakened 0.23% against the Japanese yen to 154.43.
The yen had fallen to a nine-month low a day earlier after Japanese Prime Minister Sanae Takaichi expressed support for low interest rates and closer coordination with the Bank of Japan. Japan’s Finance Minister Satsuki Katayama later issued a warning about yen weakness as it approached 155 per dollar, calling recent FX moves “one-sided and rapid.”
On Thursday, the yen also hit its weakest level against the euro since 1999.
A weaker yen could pressure the BOJ to raise rates next month. Still, traders see only a 22% chance of a quarter-point increase in December.
In Europe, the British pound strengthened despite weak GDP data showing minimal growth in the third quarter. A major cyberattack in September contributed to the slowdown. Sterling rose 0.32% to $1.3172.
Australia’s dollar climbed to a two-week high after official data showed a sharper-than-expected drop in unemployment. The improvement reduced the likelihood of additional rate cuts.
In the crypto market, bitcoin rose 0.67% to $102,557.
