Dollar lower as end to U.S. government shutdown draws nearer

The U.S. dollar slipped lower Monday, as rising optimism that the U.S. government shutdown could be coming to an end hit this safe haven.

The Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 99.370, after logging mild declines in the past week.

The news that the U.S. Senate voted to advance a measure that could fund the U.S. government through January has boosted risk appetite, with the long-running shutdown, which entered its 40th day on Sunday, seen having a significant economic impact.

On prediction market Polymarket, the implied probability that the shutdown would end before November 15 surged to 92%.

On Friday, the University of Michigan's consumer sentiment index weakened to its lowest level in nearly 3-1/2 years in early November, while White House economic adviser Kevin Hassett said the U.S. economy could contract in the fourth quarter if the shutdown dragged on.

"While some might argue that the end of the shutdown could be a risk-on, dollar-negative impulse for the FX markets, its impact may be more mixed," said analysts at ING, in a note.

"Late last week, the dollar was under pressure on job layoffs and rhetoric that the U.S. economy could contract in the fourth quarter should the shutdown extend. At the same time, Friday's release of poor US consumer sentiment data was read as a dollar negative. Progress to end the shutdown may be felt more by risk-sensitive FX cross rates than the dollar."

Source": Investing.com