US Dollar Index posts modest losses below 99.00, US CPI inflation data in focus

• US Dollar Index softens to near 98.90  in Friday's early Asian session. 
• The US government shutdown is complicating the Fed's ability to help the economy.
• Traders await the US September CPI report later on Friday. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a negative note around 98.90 during the early Asian session on Friday. Concerns over a prolonged US federal shutdown continue to weigh on the DXY. Later on Friday, the release of the US September Consumer Price Index (CPI) report will be closely watched. 

The US government shutdown, which began on Friday, entered its 24th day, marking the second-longest federal funding lapse in history, with no end in sight. The GOP-backed stopgap bill failed to pass in the Senate for a 12th time on Wednesday evening. The 54-46 vote fell mostly along party lines. A failure by Congress to pass funding legislation can erode investor confidence in US economic governance and weigh on the US Dollar against its rivals.  

The Federal Reserve (Fed) is likely to lower its key interest rate by 25 basis points (bps) next week and again in the December policy meeting, according to a Reuters poll. The ongoing US government shutdown delayed the release of key economic data. Fed Chairman Jerome Powell noted that the FOMC would consider alternative data sources when making its decision.

Economists expect the headline US CPI to increase by 0.4% MoM in September, putting the 12-month inflation rate at 3.1%. Excluding food and energy, core CPI is projected to show a 0.3% monthly increase and a rise of 3.1% on an annual basis. In case of a hotter-than-expected inflation outcome, this could lift the US Dollar in the near term.