The U.S. dollar climbed to its strongest level in six weeks on Wednesday as fears surrounding the ongoing U.S. government shutdown fueled investor demand for safe-haven assets. The dollar index, which tracks the greenback against six major currencies, rose 0.50% to 98.616 — its highest since August 27. The rally came after President Donald Trump threatened mass federal worker layoffs amid the political standoff, amplifying market unease.
Analysts at Westpac noted that the prolonged shutdown has worsened market sentiment, with no resolution in sight. According to prediction platform Polymarket, the likelihood of an end to the shutdown within the next week stands at just 26%. The benchmark 10-year U.S. Treasury yield inched up to 4.1307% from 4.127% the previous day. Despite the uncertainty, investors largely expect the Federal Reserve to cut interest rates by 25 basis points later this month, with CME Group’s FedWatch tool showing a 94.6% probability of such a move.
Gold prices surged as investors flocked to safe assets, with U.S. gold futures surpassing $4,000 per ounce for the first time. Analysts from ING attributed the surge to global economic uncertainty and the deepening U.S. political crisis.
Against the yen, the dollar strengthened to 152.205 — its highest since February — as traders assessed the policies of Japan’s incoming prime minister, Sanae Takaichi. Markets speculate that Takaichi, a protégé of the late Shinzo Abe, may revive aggressive stimulus measures that could weaken the yen further.
In the Asia-Pacific region, the New Zealand dollar traded at $0.5801 ahead of the Reserve Bank of New Zealand’s policy announcement, where a rate cut of 25–50 basis points is widely expected. The Australian dollar held steady at $0.65836, while the euro and sterling traded at $1.1655 and $1.3429, respectively. The offshore yuan remained stable at 7.1469 per dollar.