Risk Currencies Gain as U.S. Shutdown Deal Nears
Risk-sensitive currencies, such as the Australian dollar, advanced on Monday, while traditional safe havens like the Japanese yen weakened against the U.S. dollar. The move came as market sentiment improved, driven by signs that the U.S. federal government is close to ending its prolonged shutdown.
On Sunday, the U.S. Senate took a major step toward approving legislation to reopen the government, ending a 40-day closure that had disrupted air travel, delayed food aid, and left federal workers unpaid.
According to Adam Button, chief currency analyst at InvestingLive in Toronto, market optimism also stems from the belief that the Democratic Party’s position has weakened due to the shutdown standoff. Investors anticipate that if Republicans maintain control of Congress, more pro-growth fiscal policies could follow.
“This really looks like a rout for the Democrats,” Button noted. “We may see two more years of a Republican majority, which typically means more government spending — positive for stocks, gold, and global growth.”
Despite the optimism, trading volumes remained light ahead of Veterans Day, when U.S. bond markets close and forex activity typically slows.
“Most traders are avoiding large positions as they assess the uncertain outlook for U.S. fundamentals,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
As of late Monday, the U.S. dollar index slipped 0.14% to 99.59, while the euro held steady at $1.564. The dollar rose 0.44% to 154.07 yen, and the Australian dollar strengthened 0.57% to $0.6528.
The Aussie, often viewed as a barometer for global growth, gained in tandem with rising equity markets on Monday.
If the government successfully reopens, attention will likely turn to U.S. economic indicators, especially non-farm payrolls data, which has been delayed for over a month. Market expectations currently price in a 67% chance of a Federal Reserve rate cut in December — a probability that could shift sharply once new data becomes available.
Meanwhile, domestic developments in Japan and Australia also influenced currency moves.
Japanese Prime Minister Sanae Takaichi announced plans to set a new multi-year fiscal target, signaling more flexible spending and a potential loosening of fiscal discipline. The Bank of Japan’s summary of opinions added that economic uncertainty is easing, opening the door for a possible rate hike in December.
“There’s over-excitement that this could revive Abenomics,” said Salman Ahmed, global head of macro at Fidelity. “We expect another BOJ hike soon.”
In Australia, Reserve Bank Deputy Governor Andrew Hauser said that financial conditions are approaching a neutral rate, suggesting a balanced stance on policy.
Analysts at Westpac noted that Hauser’s “hawkish tone” further lifted the Australian dollar.
In the crypto market, Bitcoin climbed 0.53% to $105,060, continuing its steady upward momentum alongside risk assets.
