The dollar index (DXY) fell by 0.21% on Tuesday, influenced by the Chinese yuan reaching a 2.5-year high against the dollar. This decline was further accelerated as higher T-note yields reversed early gains, affecting the dollar’s interest rate differentials. Despite a partial US government shutdown now in its fourth day and associated selling pressures, the dollar received some support from increased liquidity demand and comments from Richmond Fed President Tom Barkin, who noted improving economic conditions and persistent inflation above the Fed’s target.
Additionally, the partial US government shutdown is expected to be brief, with a House vote on the spending bill anticipated later on Tuesday. Following President Trump’s nomination of Keven Warsh as the new Fed Chair, market expectations indicate a 9% chance for a rate cut of 25 basis points during the upcoming March 17-18 policy meeting. Meanwhile, precious metals rallied sharply, with April COMEX gold rising 6.07% and March COMEX silver gaining 8.17%, driven by weaker dollar conditions and strong underlying demand for safe-haven assets.
