By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
The dollar index extended its advance on Tuesday, supported by renewed weakness in the yen and the euro, though the ongoing US government shutdown continued to limit upside. The stalemate entered its seventh day after rival funding proposals failed in the Senate, with Democratic leader Chuck Schumer rejecting President Donald Trump’s claims of active negotiations.
In Asia, the yen slid to a two-month low after fiscal dove Sanae Takaichi’s victory in Japan’s ruling party leadership race, with markets reassessing expectations for Bank of Japan monetary policy. Meanwhile, the euro remained pressured after the resignation of France’s prime minister and cautious comments from European Central Bank officials suggesting that further rate cuts may still be on the table.
With economic data releases curtailed by the shutdown, traders shifted focus to upcoming Fed communication. Vice Chair for Supervision Michelle Bowman and Governor Stephen Miran are due to speak later on Tuesday, followed by the release of September’s FOMC minutes on Wednesday.