The US Dollar was broadly softer in Asian trading as market players digest the possibility that the United States federal government could be on the verge of shutting down. The US House of Representatives passed a bill yesterday to continue to fund the government through mid-February; the bill must also pass the US Senate where its facing some uncertainty. Complicating the situation were remarks made by President Trump against the extension of CHIP funding, an insurance lifeline for underprivileged children living in the US.
As reported at 10:43 am (JST) in Tokyo, the USD/JPY was trading at 110.99 Yen, down 0.04%. The EUR/USD was relatively flat at $1.2243, a gain of 0.01%. The GBP/USD was up 0.02% and trading at $1.3894. The USD Dollar Index, used by FX traders to gauge the relative strength of the Dollar compared to a weighted basket of major peers, was 90.496 .DXY, down 0.02%.
Dollar Doldrums Could Endure
Though the possibly looming government shutdown is currently weighing on the Dollar, since 2017 the greenback has fallen on expectations that, alongside the Fed, the world’s other major central banks are also considering or else already implementing policy to rein in ultra-low interest rates. The fact that those banks are now playing “catch up” in the normalization of monetary policy is drawing market focus. Moreover, the central banks are moving to diversify their respective holdings away from the US Dollar and into other currencies. Both Japan and China reduced their US Treasury holdings late last year.