The U.S. dollar slipped on Monday as traders awaited several key economic reports that could offer more clues on the Federal Reserve’s rate outlook. At the same time, markets grew increasingly concerned about the risk of a potential U.S. government shutdown this week.
Currency movements were muted in Asian trading, but the dollar gave up some strength after finishing last week higher on reduced expectations for Fed rate cuts.
The dollar fell 0.4% against the yen to 148.94, after gaining more than 1% versus the Japanese currency last week. The euro rose 0.28% to $1.1731, while the British pound gained 0.27% to $1.3439. The U.S. Dollar Index slipped 0.22% to 97.93, after a 0.5% rise the previous week.
U.S. shutdown fears dominate markets
Investor focus turned to whether Congress can pass a funding bill before the fiscal year ends on Tuesday. Without new legislation, parts of the federal government would close starting Wednesday, the first day of fiscal year 2026.
A shutdown could also delay the release of Friday’s closely watched nonfarm payrolls report, raising uncertainty for traders. Ray Attrill, head of FX research at National Australia Bank, said that if payrolls data is not published, markets will have little to trade on ahead of the Fed’s late October meeting.
Key data ahead of Fed meeting
Investors will also receive updates this week on job openings, private payrolls, and the ISM manufacturing PMI. These releases will provide more insight into the strength of the U.S. economy.
Recent U.S. data has proven more resilient than expected, pushing markets to scale back expectations for aggressive Fed easing. Current pricing suggests about 40 basis points of cuts by December.
Aussie and Kiwi dollars edge higher
In Asia-Pacific trading, the Australian dollar rose 0.36% to $0.6571, while the New Zealand dollar added 0.26% to $0.5791. The Reserve Bank of Australia will announce its policy decision on Tuesday, with markets expecting no change in interest rates.
