On Monday, the US dollar weakened against most major currencies, reflecting growing investor concern over the state of the federal budget and the outlook for monetary policy. Financial markets remain cautious: on one hand, a potential end to the government shutdown appears near; on the other, worries persist about debt risks and slowing economic growth.

Pressure on the dollar intensifies

After a brief period of strengthening, the US Dollar Index (DXY) fell below 99.7 points — its lowest level in the past three weeks. The main driver of the decline was investor expectations that the government shutdown may soon end, which could ease fiscal tensions and stimulate moderate demand for riskier assets.

However, many investors are reluctant to abandon “safe haven” instruments. The Treasury bond market remains volatile: the yield on 10-year Treasuries rose to 4.41%, signaling that expectations for rapid Federal Reserve rate cuts are fading. Analysts note that the dollar is losing support as the balance between inflation risks and recession fears continues to shift.

Main reasons for the dollar’s weakness

The decline of the US currency is driven by several fundamental and short-term factors, each shaping current market sentiment and influencing exchange rate dynamics in the coming weeks:

• Political uncertainty — the ongoing standoff in Congress raises doubts about the sustainability of fiscal policy.
• Slowing inflation — recent data showed a moderate decline in consumer prices, reducing pressure on the Fed.
• Rising appetite for risk — equity and commodity markets are showing gains, weakening demand for the dollar as a “safe harbor.”
• Central bank interventions — actions by Japan and China to stabilize their currencies are exerting counterpressure.
• Expectations of Fed easing — investors are increasingly pricing in a possible rate cut in the first quarter of 2026.

The combination of these factors makes the dollar vulnerable to a correction wave, especially if optimism around the shutdown’s resolution proves justified.

Reaction of global currencies and investor behavior

The euro strengthened to $1.107, its highest level since mid-October. The European currency found support in stable business activity data across the eurozone and cautious optimism about Germany’s economic recovery. Analysts emphasize that the euro’s rise is driven more by the dollar’s weakness than by internal macroeconomic success — market participants are largely taking profits on long dollar positions.

The Japanese yen also posted moderate gains, with the USD/JPY pair trading between 147.8 and 148.2. Bank of Japan officials hinted at readiness for currency intervention if the yen continues to fall, cooling speculative positions against it. The British pound climbed to $1.29 amid expectations that the Bank of England will maintain a tight policy longer to contain domestic inflation.

Analysts note that the dollar’s decline coincided with increased risk appetite: European and Asian stock markets closed in the green, while oil and industrial metal prices showed moderate growth. This suggests investors view the dollar’s weakness as a temporary phase amid a broader search for balance. Many funds have started partially reallocating assets toward emerging markets, further pressuring the greenback. Meanwhile, major institutional players remain cautious, keeping part of their liquidity in US bonds until the political situation in Washington becomes clearer.

Forecast and key benchmarks

In the coming days, experts expect moderate volatility, with possible DXY fluctuations between 99.4 and 100.2 points. Much will depend on news from Washington — if the shutdown does end, the dollar may temporarily stabilize, but further strengthening will require strong macroeconomic signals. Key factors that market participants will monitor include:

• the release of US inflation data for October;
• new comments from Federal Reserve officials;
• Treasury yield movements;
• congressional budget decisions;
• the response of equity and commodity markets.

If macroeconomic data confirm a trend of easing inflation and moderate economic growth, the dollar could remain under pressure through the end of November, consolidating near the lower bound of its annual range.