FX168 Financial News Agency (Asia-Pacific) reported on Thursday (October 3) that a top foreign exchange currency forecaster said the US dollar might weaken further as the US government shutdown entered its second day.
The political deadlock in Washington has caused the weekly initial jobless claims data, released on Thursday, to be delayed and may postpone the latest monthly nonfarm payrolls report originally scheduled for release on Friday.
Jason Schenker, President of Prestige Economics, stated that in the absence of economic data, the remarks of monetary policymakers will provide traders with clues regarding the Federal Reserve’s interest rate trajectory.
(Source: Bloomberg)
Schenker said in an interview, ‘The government shutdown will exacerbate the recent downside risks to the US dollar.’
Notably, Schenker has ranked first in Bloomberg’s foreign exchange forecaster rankings for the second consecutive quarter.
The Bloomberg Dollar Index has fallen more than 8% so far this year, and Schenker predicts that the US dollar will decline further.
After falling for four consecutive trading sessions, the US Dollar Index edged higher on Thursday.
Schenker said, ‘As the government shutdown affects data releases, the Fed’s commentary may become even more critical for assessing the future policy direction of the Federal Reserve.’
(Source: Bloomberg)
In the weeks leading up to the policy meeting at the end of October, a number of Federal Reserve officials will speak, providing guidance to traders. So far, traders have been betting that the Fed will continue to cut interest rates this year to boost a sluggish labor market.
On Thursday, Dallas Fed President Lorie Logan said that due to rising risks of increasing inflation expectations, the Fed needs to be cautious about cutting interest rates. Meanwhile, Fed Governor Stephen Miran last week called for rapid rate cuts. Chicago Fed President Austan Goolsbee has stated that the lack of official data would make it more difficult for policymakers to interpret economic conditions.
Nevertheless, “once the government shutdown issue is resolved, the dollar may rebound,” but Schenker still expects “the dollar to continue its weakening trend and potentially stabilize next year.”
Schenker predicts that the euro/dollar exchange rate will rise from the current level of 1.17 to 1.19 by the end of the year, and expects the yen to strengthen against the dollar this year, moving from approximately 147 yen per dollar on Thursday to 145 yen per dollar.
He added: “The foreign exchange market is susceptible to significant fluctuations caused by domestic policy risks associated with a U.S. government shutdown.”
