Analyst: Government Shutdown Puts Pressure on the Dollar, Metrics Show Further Downside Risk for the Dollar

BlockBeats News, October 1st, as the United States experiences its first government shutdown in nearly seven years, the US dollar is seeing its longest continuous decline within a month. Historical data shows that government shutdowns typically pressure the US dollar, a trend also reflected in the options market. The Risk Reversal Index (used to measure the gap between demand for call and put options) indicates that the US dollar faces further downside risk in the coming month. Mohit Kumar, Chief European Strategist at Jefferies, stated that while the drop in the stock market and the rise in US Treasury yields may be relatively mild, the "foreign exchange market is not a market where we would expect a reversal of the current trend," and he expects the softness of the US dollar to persist. The duration of the government shutdown is crucial, as the longer it lasts, the greater the pressure on the US dollar. So far this year, the US dollar has fallen to its lowest level since 2022, due to reasons including the uncertainty of policies under the Trump administration, continuously expanding deficits, and the pressure on the independence of the Federal Reserve, all of which have raised concerns among investors. (FXStreet)