U.S. Dollar Softens as Hopes Grow for Government Reopening
The U.S. dollar weakened slightly on Monday, as growing optimism over a potential end to the federal government shutdown boosted investor confidence. The move followed a week of soft U.S. economic data that raised concerns about consumer sentiment and growth momentum.
The dollar index, which measures the greenback’s performance against six major currencies, slipped 0.1% to 99.643 after the U.S. Senate advanced a measure that could fund the government through January.
“This is just in the nick of time,” said Tony Sycamore, market analyst at IG in Sydney. “The retreat we saw in the U.S. dollar into the end of last week probably continues now.”
Weak Economic Data Weighs on Sentiment
On Friday, the University of Michigan’s Consumer Sentiment Index fell to its lowest level in nearly three and a half years, highlighting how the prolonged government shutdown affected U.S. households.
“The confidence data was a shocker,” Sycamore added, noting that a potential resolution could help ease some of the economic strain.
Prediction market Polymarket placed the probability of the shutdown ending before November 15 at 92%, reflecting growing market confidence.
Dollar Edges Higher Against Yen Amid Japan Policy Moves
Despite broader weakness, the dollar gained 0.2% against the yen, trading at 153.80 yen, after comments from Japanese Prime Minister Sanae Takaichi signaled a more flexible fiscal policy. The shift effectively softens Japan’s prior commitment to fiscal consolidation.
The Bank of Japan also released a report noting that the “fog surrounding Japan’s economic outlook has begun to clear”, suggesting improved visibility for monetary policy.
Asia Growth Outlook and Global Policy Context
Traders are assessing the effects of U.S. President Donald Trump’s economic policies, which had driven a production surge earlier in the year ahead of new tariff deadlines. Over the weekend, Chinese CPI data showed a faster-than-expected rise in consumer inflation, while exports recorded their steepest drop since February.
Eric Robertsen, Global Head of Research at Standard Chartered Bank, said in a note that Asia’s growth may slow now that “export front-loading has largely run its course.” He added that “the region’s rate-cutting cycle is nearly complete,” which may cause inflows into Asian assets to moderate.
Robertsen also warned that the global liquidity supporting asset markets in 2025 could weaken in 2026, potentially leading to further U.S. dollar strength over the next year.
U.S. Rate Outlook and Market Reaction
Investors are scaling back expectations for further Federal Reserve rate cuts. The yield on 10-year U.S. Treasury notes rose 4.26 basis points to 4.1356%, compared with 4.093% at Friday’s close.
According to the CME FedWatch Tool, markets now price in a 63% probability of a 25-basis-point cut at the Fed’s December 10 meeting — down from 67% last week.
Meanwhile, the euro edged 0.1% lower to $1.1559, and sterling traded at $1.3148, also down 0.1%. The offshore yuan held steady at 7.1204, while the Australian dollar strengthened 0.4% to $0.6520, and the New Zealand dollar gained 0.1% to $0.5632.
Outlook
Market optimism around the potential U.S. government reopening has lifted investor sentiment, but uncertainties remain regarding Federal Reserve policy and global growth trends. Traders will continue monitoring U.S. economic data and upcoming fiscal developments for signs of stability heading into year-end.
