By Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A
The dollar index rose on Wednesday, as weakness in the euro and yen overshadowed concerns about the US government shutdown. The prolonged impasse continues to delay key data releases and cloud the policy outlook, but investors appear more focused on political turmoil in France and uncertainty in Japan.
In Tokyo, Sanae Takaichi’s unexpected leadership win raised expectations of stimulus-friendly policies that could weigh further on the yen. Meanwhile, in Europe, France’s deepening political instability has reignited fiscal concerns and added pressure on the common currency. Against this backdrop, the dollar benefited from safe-haven flows.
Attention now turns to monetary policy signals. The Federal Reserve is widely expected to deliver quarter-point rate cuts in both October and December, with several officials backing a faster easing cycle to shield the labor market. The release of September’s FOMC minutes later today, alongside remarks from policymakers, including Chair Jerome Powell on Thursday, could sharpen rate expectations and create volatility in the bond market.
U.S. yields were mixed, with the 10-year Treasury holding above 4.1%. Traders see scope for movement once the Fed minutes are digested and as Powell outlines the central bank’s outlook.