The U.S. dollar weakened on Monday, pressured by mounting optimism that the prolonged U.S. government shutdown may soon be resolved, prompting investors to shift away from the safe-haven currency.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against six major peers, fell 0.1% to 99.370, extending the mild losses recorded last week.

Shutdown Nearing Resolution?

Market sentiment improved sharply after the U.S. Senate voted to advance a funding bill that would keep the government open through January, a move seen as the first real step toward ending the 40-day shutdown, which has taken a notable economic toll.

On prediction market Polymarket, the probability of the shutdown ending before November 15 surged to 92%, reflecting renewed confidence among investors.

Economic indicators, however, continue to show strain. On Friday, the University of Michigan’s consumer sentiment index fell to its lowest level in nearly three and a half years, while White House economic adviser Kevin Hassett warned that the U.S. economy could contract in the fourth quarter if the deadlock persists.

“While some might argue that the end of the shutdown could be a risk-on, dollar-negative impulse for the FX markets, its impact may be more mixed,” said analysts at ING in a note.

They added, “Late last week, the dollar was under pressure on job layoffs and rhetoric that the U.S. economy could contract in the fourth quarter should the shutdown extend. At the same time, Friday’s release of poor US consumer sentiment data was read as a dollar negative. Progress to end the shutdown may be felt more by risk-sensitive FX cross rates than the dollar.”

Euro Edges Higher

The euro strengthened modestly, with EUR/USD up 0.1% to 1.1579, supported by comments from European Central Bank Vice President Luis de Guindos, who said in an interview that ECB interest rates are currently at the appropriate level, barring major shifts in the economic outlook. His remarks suggested that further rate cuts are unlikely in the short term.

De Guindos added that the ECB must remain “very prudent and cautious” in setting rates, even as uncertainty has eased in recent months following the EU–U.S. trade deal.

The British pound also inched higher, with GBP/USD rising 0.1% to 1.3178 ahead of a week packed with key U.K. economic data releases.

“We still think the prospects of a December 25bp cut from the Bank of England are underpriced,” ING analysts said. “The market now attaches just a 60% probability to such an outcome. Feeding into the BoE story will be tomorrow’s release of the September wage data. This is expected to slow further and give the BoE greater confidence that inflation is less persistent than first thought.”

Yen Weakens Following Fiscal Policy Remarks

In Asia, the Japanese yen slipped, with USD/JPY rising 0.4% to 153.98, after comments from Prime Minister Sanae Takaichi, who announced plans to set a new multi-year fiscal target that would allow more flexible government spending, signaling a shift away from Japan’s prior focus on fiscal consolidation.

Chinese Yuan Steady; Antipodean Currencies Gain

The Chinese yuan was relatively stable, with USD/CNY down 0.1% to 7.1173, after data showed that consumer price inflation exceeded expectations in October, while producer price inflation contracted at a slower-than-anticipated pace.

Meanwhile, the Australian and New Zealand dollars gained ground on improved risk sentiment. The AUD/USD climbed 0.6% to 0.6532, and the NZD/USD advanced 0.3% to 0.5642, as investors shifted toward higher-yielding assets amid hopes of an imminent U.S. government reopening.

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