Dollar rallies from post-Fed losses as US shutdown likely
The dollar gained on Friday as investors sought the currency's safety amid persistent equity market volatility and a possible U.S. government shutdown.
The dollar had fallen two straight days after the U.S. Federal Reserve on Wednesday flagged fewer interest rate hikes for the next two years.
The safe-haven Japanese yen gained versus the dollar on overall market anxiety. On the week, the yen had its best weekly performance in percentage terms since February.
U.S. President Donald Trump conceded on Friday there was a good chance the Senate would not approve his demand for $5 billion toward funding his border wall project and a government shutdown would probably begin at midnight. The news undermined Wall Street shares, with the S&P 500, already on pace for its worst December since the Great Depression, hitting its lowest since August 2017. The Dow Jones industrial average fell to its weakest since October 2017, while the Nasdaq sank to a 15-month low, flirting with bear market territory for a second day in a row.
"It's not clear at this stage whether President Trump would agree to a continuing resolution to temporarily fund the government, or would instead seek a government shutdown, which would go into effect at midnight tonight," said Nick Bennenbroek, currency strategist at Wells Fargo Securities in New York. He added that if the shutdown goes into effect, he expects the dollar to continue its bounce next week. US economic reports on Friday were mixed and had minimal impact on the dollar.
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