Insights 
VT 
The US Dollar Index (DXY) has dipped to around 98.75 during the Asian trading hours on Thursday, affected by the ongoing US government shutdown that has lasted nine days. The Senate’s inability to reach an agreement over funding continues to affect market perceptions, potentially impacting the US Dollar negatively against other currencies.
Federal Reserve And Market Reactions
Following the release of the Federal Open Market Committee minutes, there is an indication that more rate cuts could be forthcoming this year. The majority of policymakers supported the September rate cut, with a 78% likelihood of another 25 basis point cut expected in December. Meanwhile, weekly US jobless claims data is delayed, and Federal Reserve Chair Jerome Powell is scheduled to speak later today, which could alter the DXY’s performance depending on his remarks.
The US Dollar remains the dominant global currency, involved in 88% of international foreign exchange turnover, as per 2022 data. While decisions by the Federal Reserve significantly impact the USD, strategies like quantitative easing typically weaken the currency unless counteracted by measures such as quantitative tightening. Despite policy adjustments, the US Dollar continues to play a central role in global finance and trade.
We remember when government shutdown fears and the prospect of rate cuts pushed the Dollar Index below 99. Now, in October 2025, the landscape is completely different with the Fed in a determined tightening cycle. The DXY is currently trading much stronger, holding near 106.50 as global investors seek the safety and yield of the dollar.
The primary driver has been persistent inflation, which, according to the latest September data, is holding stubbornly at 3.5% year-over-year. This has forced the Federal Reserve to maintain a hawkish stance, pushing the federal funds rate to a 5.75% high. This is a stark reversal from the rate-cutting environment we saw in the past when the Fed was signaling further easing.
Market Volatility And Future Economic Indicators
Given this backdrop, we should anticipate heightened volatility in USD-related pairs, especially as unemployment has started to slowly tick up to 4.2%. Options strategies, like buying straddles on major currency pairs, could be effective for playing potential sharp moves as the market digests the Fed’s dual mandate dilemma. Implied volatility in the options market has already climbed by 15% over the last month, reflecting growing investor nervousness.
Our immediate focus should be on the upcoming Consumer Price Index (CPI) report and the next FOMC meeting in November. The CME FedWatch Tool now shows the market is pricing in a 60% probability of one final rate hike, but any weakness in the data could shift this calculus rapidly. We must also monitor the renewed budget negotiations in Congress, as memories of past shutdowns show how quickly political deadlock can roil markets and impact the dollar.
