Dollar Weakens Amid U.S. Shutdown Worries, Rate-hike Pause Hopes

The U.S. dollar was lower against its most major counterparts in the European session on Monday, as U.S. government shutdown entered its fourth week, while mounting hopes that the Fed will pause its tightening cycle also weighed.

The US government shutdown has become the longest in history, as Trump and the Democrats remained at loggerheads over the President's demand for $5.7 billion to build a wall along the U.S.-Mexico border.

Over the weekend, Trump warned of a much longer impasse and blamed the democrats for the shutdown.

U.S. treasury yields fell, with the benchmark yield on 10-year note falling 2.67 percent, while that of the 2-year equivalent was down by 2.52 percent. Yields move inversely to bond prices.

China's exports and imports fell unexpectedly in December, raising fresh concerns about global growth.

China's exports unexpectedly fell 4.4 percent from a year earlier in the month — the biggest monthly drop in two years, while imports also fell 7.6 percent, marking the biggest decline since July 2016.

The currency traded mixed against its major counterparts in the Asian session. While it fell against the yen and the euro, it held steady against the franc and the pound.

The greenback depreciated to a 4-day low of 107.99 against the yen, from a high of 108.55 hit at 5:00 pm ET. If the greenback falls further, 106.00 is possibly seen as its next support level.

Having climbed to 0.9845 against the franc at 2:15 am ET, the greenback changed its course and slipped to a 4-day low of 0.9813. The greenback is seen finding support around the 0.97 region.

The greenback slid to 1.2880 against the pound, its biggest decline since November 23, 2018. The next possible support for the greenback is seen around the 1.30 level.

On the flip side, the greenback held steady against the euro, after touching a peak of 1.1451 at 5:00 am ET, which was its strongest since January 9. The pair finished last week's deals at 1.1468.

Data from the Eurostat showed that Eurozone's industrial production decreased at a faster-than-expected pace in November.

Industrial production decreased a seasonally adjusted 1.7 percent from October, when it edged up 0.1 percent, revised from 0.2 percent. Economists had expected a 1.5 percent slump.

The greenback appreciated to a 4-day high of 0.7176 against the aussie and 6-day high of 1.3298 against the loonie and held steady thereafter. The greenback finished Friday's trading at 0.7214 against the aussie and 1.3264 against the loonie.

The greenback that closed Friday's deals at 0.6832 against the kiwi advanced to 0.6797 and held steady thereafter.