Dollar Closes in on Two-Month High as Global Fiscal Woes Mount
The dollar approached a two-month high on Wednesday as fiscal and economic concerns from Asia to Europe weighed on the currencies of its Group-of-10 peers.
The Bloomberg Dollar Spot Index advanced as much as 0.3%, before paring gains, to come within striking distance of its highest since early August. The move was helped by hedge funds buying more bearish euro and yen option bets, and real money demand for long-dollar exposure, according to traders in Asia and Europe.
After tumbling to the lowest since 2022 in September, the dollar has strengthened in recent days as a slew of worries abroad outweigh any negative impact from the US government shutdown. The euro has been hit by France’s political turmoil while the yen has slumped on speculation that Japan’s likely new leader may favor more fiscal expansion and a slower pace of interest-rate hikes.
The greenback got an additional boost Wednesday as the New Zealand dollar tumbled to a six-month low after its central bank delivered a larger-than-usual interest-rate cut and signaled a willingness to ease further.
Options suggest conviction is shifting in favor of the US currency. One-year risk reversals, which measure the difference in demand for bullish versus bearish bets, show traders are the most optimistic on the dollar since April, marking a sharp turnaround after months of mostly bearish positioning.
The Bloomberg dollar gauge has strengthened almost 1% since end-September, paring its year-to-date decline to about 7.6%. The currency has been on the backfoot for most of 2025 due to Federal Reserve easing, the waning pull of US exceptionalism and the growing appeal of gold as a haven play.
Source : Bloomberg.com
