Dollar set for weekly slide as trade, shutdown concerns weigh

The dollar index is set for its biggest weekly drop in almost three months as an extended shutdown of the U.S. government blocked the publication of key economic data.

The yen held on to gains after Bank of Japan Governor Kazuo Ueda spoke about factors that could lead to a rate increase this month.

Compounding concerns about trade, Fed independence and the U.S. shutdown are making the greenback vulnerable to the debasement trade, where investors seek assets that can’t easily be devalued, said Pepperstone research strategist Dilin Wu.

“It’s really hard to find a bullish scenario for the dollar index,” said Wu. “Instead of betting on any currency by a single sovereign credit, people are rushing into gold, cryptocurrency, and other assets as a risk hedge.”

The dollar index, which measures the greenback against a basket of currencies, was little changed at 98.23 and remained on course for a 0.6% slide this week – the biggest five-day retreat since late July.Against the Japanese yen, the dollar weakened 0.2% to 150.12. BOJ Governor Ueda said in Washington on Thursday that the central bank remains ready to increase its key policy rate if the likelihood of its growth and price forecasts materializing increases. BOJ Deputy Governor Shinichi Uchida is due to speak later on Friday.

The euro added 0.1% at $1.1701, while sterling also tacked on 0.1% to $1.3446.

Fed Governor Christopher Waller said he is on board with another interest rate cut at the U.S. central bank’s meeting later this month because of the mixed readings on the state of the job market.

Stephen Miran, the Fed’s newest governor and an economic advisor to U.S. President Donald Trump, reiterated support for more aggressive rate cuts at upcoming meetings than the one favored by some of his colleagues.

Miran’s seat expires at the end of January, while Fed Governor Lisa Cook remains in place as the case over Trump’s attempt to fire her winds through the courts.

The Fed’s Beige Book offered little support to U.S. rates, pointing to emerging signs of economic weakness, including rising layoffs and reduced spending among middle and lower-income households.

Trade frictions between Beijing and Washington heated up overnight, with China accusing the U.S. of stoking panic over its rare earth controls, rejecting a White House call to roll back the curbs.

In cryptocurrencies, bitcoin gained 0.6% to $108,534.66, and ether rose 1.8% to $3,919.71.