Dollar on the defensive before data releases, risk of US government shutdown

SINGAPORE: The dollar was on the defensive on Monday ahead of a slew of U.S. economic releases that could provide further clarity on the Federal Reserve’s rate path, while the growing risk of a government shutdown there also came into sharp focus.

Currency moves were largely subdued in the early Asian session, though the dollar gave up some gains after ending last week stronger on the back of reduced Fed rate-cut bets.

Against the yen , the dollar was down 0.2% to 149.24, after having risen over 1% against the Japanese currency last week.

The euro rose 0.15% to $1.1717, while sterling edged 0.11% higher to $1.3418.

Top of investors’ minds was a looming U.S. government shutdown should Congress fail to pass a funding bill before the fiscal year ends on Tuesday.

Without passage of funding legislation, parts of the government would close on Wednesday, the first day of the U.S. government’s 2026 fiscal year.

That would have implications for the release of Friday’s closely watched nonfarm payrolls report.

“I think the assumption will be that if we’re going to have a government shutdown, we won’t have the payrolls numbers. So… how do you trade the non-release of a number? You can’t,” said Ray Attrill, head of FX research at National Australia Bank.

“The Fed meeting is not till the end of October. So I guess the working assumption will be that if we go into a shutdown, hopefully it won’t last sufficiently long. The numbers will still be available and published prior to the October meeting. I guess that’s really what’s important.”

Ahead of Friday’s jobs report, investors will also get figures on job openings, private payrolls, the ISM manufacturing PMI, among others, for further clues on the health of the U.S. economy.

A run of resilient U.S. economic data in recent times has pushed back against expectations of aggressive Fed rate cuts, with markets now pricing in about 40 basis points worth of easing by December.

In other currencies, the Aussie was last 0.15% higher at $0.6557, while the New Zealand dollar ticked up 0.07% to $0.5780.

The Reserve Bank of Australia announces its rate decision on Tuesday, where expectations are for the central bank to stand pat on rates.