The US Dollar Index (DXY), which tracks the dollar’s value against a selection of six major currencies, was in the red early Wednesday, hovering around 98.90. This decline followed three days of increases and is linked to the ongoing U.S. government shutdown.
The shutdown marked its 22nd day on Monday as the Senate once again failed—this time for the 11th occasion—to push through a House-approved bill aimed at funding the government. The voting breakdown was largely partisan, with a 50-43 result.
Failure to pass a funding bill could shake investor confidence in the economic governance of the U.S., putting additional pressure on the dollar when compared to other currencies. Furthermore, key economic reports from the Bureau of Labor Statistics and the Census Bureau are currently on hold, complicating decisions for the Federal Reserve.
As it stands, futures on federal funds indicate a nearly 98.9% likelihood of a 25 basis point rate cut during the central bank’s meeting on October 29, a slight decrease from a 99.4% probability just the previous day, according to CME FedWatch.
Conversely, some positive shifts in U.S.-China relations might help cushion DXY’s losses. President Donald Trump expressed optimism late Tuesday about his upcoming meeting with Chinese President Xi Jinping, predicting a “good deal” could emerge for trade. Yet, he also admitted that this much-anticipated meeting might not take place. U.S. Treasury Secretary Scott Bessent is slated to have talks with China’s Treasury Secretary ahead of broader trade discussions to mitigate trade tensions.
