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The dollar was little changed Wednesday, recovering from earlier declines, as traders weighed the potential fallout from a U.S. government shutdown.
The dollar index, which gauges the greenback’s performance against six rival currencies including the euro and the Japanese yen, was last up just 0.02% at 97.79. Earlier in the day, it fell more than 0.2%, putting it on pace for its worst annual decline in 22 years.
The U.S. government shut down after the Senate short-term funding bill failed to pass, and Democrats led by Senate minority leader Sen. Chuck Schumer and House minority leader Rep. Hakeem Jeffries push for a measure to extend enhanced Obamacare tax credits. President Donald Trump, meanwhile, threatened benefit cuts for “large numbers of people” if an agreement wasn’t reached.
Dollar index year to date
“Historically, shutdowns have corresponded with a weaker USD, though primarily against safe haven currencies” such as the yen, Swiss franc and euro, wrote FX analyst Daniel Tobon of Citigroup. “Given persistent [U.S. dollar] pessimism in the current market narrative, further increased U.S. political uncertainty should also pressure the USD lower. However, a quick resolution to the shutdown could lead to limited follow-through, keeping us in similar ranges to recent months.”
