Government shutdown pressures the dollar, risk indicators show downside risks.

[Government Shutdown Pressures Dollar, Risk Indicators Show Downside Risk] As the U.S. enters its first government shutdown in nearly seven years, the dollar is experiencing its longest decline in a month. Historical data shows that government shutdowns typically put pressure on the dollar, and the options market reflects this trend. The risk reversal indicator (used to measure the demand gap between bullish and bearish trades) indicates that the dollar faces further downside risk in the coming month. Mohit Kumar, Chief European Strategist at Jefferies, stated that the magnitude of the stock market decline and the increase in U.S. Treasury yields may be moderate, but "the forex market is one we do not expect to reverse the current trend," and he anticipates that the dollar's weakness will continue. The duration of the government shutdown is crucial; the longer it lasts, the greater the pressure on the dollar. So far this year, the dollar has fallen to its lowest level since 2022, due to factors such as the uncertainty of policies under Trump, the widening deficit, and the pressure on the Fed's independence, all of which have raised concerns among investors. ( Jin10 )