Dollar Gains Amid U.S. Economic Data; Shutdown Concerns Grow

New York, NY — The U.S. dollar maintained significant gains on Friday, following positive economic data that reduced expectations for further easing by the Federal Reserve this year.

The dollar index, which measures the currency’s value against six others, dipped 0.2% to 97.61 after concerns about a potential government shutdown arose when U.S. lawmakers failed to pass a short-term funding bill earlier this week. This drop puts the benchmark index on track for a 10% decline for the year, which would be the dollar’s largest yearly loss since 2003.

Senate and House Democrats, led by Senate minority leader Chuck Schumer and House minority leader Hakeem Jeffries, are advocating for a measure to extend enhanced tax credits under the Affordable Care Act, commonly known as Obamacare. Meanwhile, former President Donald Trump has threatened significant benefit cuts if a bipartisan agreement is not reached.

“Historically, shutdowns have corresponded with a weaker USD, particularly against safe haven currencies such as the yen, Swiss franc and euro,” said Daniel Tobon, a forex analyst at Citigroup. “Given the ongoing pessimism surrounding the U.S. dollar, further political uncertainty could drive the dollar lower. However, if a quick resolution to the shutdown is achieved, the impact may be limited.”

The dollar’s recent decline also contributed to an increase in gold futures, which reached over $3,900 an ounce, as gold prices often rise when the dollar weakens.