US Dollar Index falls toward 98.00 due to US government shutdown, Fed rate cut bets

• US Dollar Index declines as the government shutdown will extend into next week.
• Fed Governor Christopher Waller said he supports another interest rate cut at this month's policy meeting.
• Treasury Secretary Bessent called China's rare earth export curbs "economic coercion" and "a global supply chain power grab."

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its losses for the fourth successive session and trading around 98.20 during the Asian hours on Friday. The Greenback weakens as traders adopt caution amid a prolonged United States (US) government shutdown, increased likelihood of US interest rate cuts, and escalating US-China trade tensions.

The US federal government shutdown will continue into next week, delaying key economic data that could guide policy decisions. The US Senate once again failed to pass a Republican bill to extend funding and end the stalemate, marking the tenth unsuccessful attempt on Thursday, the 16th day of the impasse.

US Federal Reserve (Fed) Governor Christopher Waller stated on Thursday that he supports another interest rate cut at this month's upcoming policy meeting. Meanwhile, the Fed's newest governor, Stephen Miran, reiterated his call for a more aggressive rate-cut trajectory for 2025 than that favored by his colleagues. The Fed's Beige Book pointed to growing economic strains, citing rising layoffs and weaker spending among middle- and lower-income households.

US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent criticized China's plans to restrict rare earth exports, calling them "economic coercion" and "a global supply chain power grab." Bessent warned, "If China wants to be an unreliable partner to the world, then the world will have to decouple." However, both officials left room for negotiation, expressing uncertainty over whether China would actually follow through with the export controls announced last week, per BBC.