The dollar strengthened during early Asian trading on Wednesday as concerns over the potential U.S. government shutdown intensified, raising worries among investors and increasing demand for safe-haven assets.
The dollar index, which tracks the performance of the U.S. currency against six other currencies, climbed 0.3% to 98.91, reaching its highest level since August 5. This surge followed President Donald Trump’s threat of mass federal employee layoffs amid the ongoing shutdown crisis.
Analysts from Westpac noted in a research report, “With no resolution in sight regarding the government shutdown, market sentiment has deteriorated.”
The New Zealand dollar fell by as much as 1% to a low of 0.5739 after the Reserve Bank of New Zealand unexpectedly cut interest rates by 50 basis points, a larger reduction than anticipated, and indicated the likelihood of further easing following a recent downturn in economic data.
Joseph Capurso, head of foreign exchange and international economic geography research at the Commonwealth Bank of Australia, remarked, “The market was pricing in only a 30% chance of a 50 basis point cut from the Reserve Bank of New Zealand today.”
He added, “It was inevitable that the New Zealand dollar would decline.”
The Australian dollar also slipped, trading down 0.4% at 0.65595.
The dollar was valued at 152.535 yen, up 0.4% from levels seen late yesterday, hovering near the strongest point since February as investors assessed the economic policy impacts of Sanae Takaichi, who won the leadership of the ruling party and is poised to become Japan’s new prime minister.
The euro traded at 1.1618, down 0.3% during Asian hours, while the British pound was at 1.3395, falling 0.2%.
The offshore yuan weakened by 0.1% from the previous session to 7.1506 per dollar.