The US Dollar Index (DXY) extended its advance for a third consecutive session during Wednesday’s Asian trading, hovering near 98.90 ahead of the release of the Federal Open Market Committee (FOMC) Minutes later in the North American session.
Safe-haven flows support the greenback
The US dollar continues to attract demand as investors seek safety amid growing political and fiscal uncertainty in Washington. The ongoing federal government shutdown, now in its second week, has intensified after President Donald Trump warned of potential mass layoffs among federal employees if negotiations remain stalled. Despite mounting pressure, Democrats have remained firm in their opposition, prolonging the impasse and fueling risk aversion across markets.
Dovish Fed expectations limit upside
While safe-haven flows have buoyed the dollar, expectations of further monetary easing by the Federal Reserve (Fed) are capping its upside. According to the CME FedWatch Tool, markets are pricing in a 95% probability of a 25-basis-point rate cut in October and an 83% chance of another reduction in December.
Fed Board of Governors member Stephen Miran remarked Tuesday that inflationary trends are largely demographic in nature, citing population growth as a key factor. He added that monetary policy should ease to align with a lower neutral rate. Meanwhile, Minneapolis Fed President Neel Kashkari adopted a more cautious stance, noting uncertainty around tariff-driven inflation but expressing optimism about a potential rebound in US job creation.
The upcoming FOMC Minutes are expected to offer deeper insights into policymakers’ rate-cut outlook, which could determine whether the DXY extends its rally beyond the 99.00 mark or faces renewed selling pressure.
