Bullish sentiment toward the U.S. dollar weakened as negotiations between Democrats and Republicans over reopening the federal government showed progress, prompting the dollar index to retreat from recent highs amid growing expectations that the longest government shutdown in U.S. history may soon come to an end.

The Federal Reserve is expected to resume receiving economic data shortly, a move that would ease its current caution. In this context, the probability of a rate cut in December has risen to 74%, while U.S. Treasury yields have declined.

Nevertheless, the greenback found temporary support from increased demand for safe-haven assets amid falling U.S. stock indices and the Supreme Courts decision to review the legality of certain import tariffs.

According to the PredictIt platform, the probability of Donald Trump losing now stands at 73%, while Polymarket estimates it at 64%. Analysts noted that repealing import tariffs could weigh heavily on the U.S. economy and the dollar, as it would trigger refund payments and widen the federal deficit factors that would likely force spending cuts and tax increases, slowing GDP growth and pushing the Fed toward deeper rate cuts.

In the short term, however, heightened market volatility could still lend support to the dollar and other safe-haven currencies.

The USD/CHF and USD/JPY pairs both pulled back from recent highs.

The Swiss franc came under pressure amid renewed speculation that the Swiss National Bank might revert to a negative interest-rate policy, while the Japanese yen faced headwinds from the Bank of Japans hesitation to signal continued policy normalization.

Minutes from the latest Bank of Japan meeting showed that some board members urged caution, warning that Japans prolonged experience with deflation means that excessive rate hikes could risk a return to that state. Such remarks reduced the likelihood of another near-term increase in the overnight rate, keeping pressure on the yen. At the same time, verbal intervention and rising safe-haven demand amid growing market volatility contributed to mixed moves in the USD/JPY pair.

Meanwhile, the British pound fell to its lowest level since April after Chancellor Rachel Reeves indicated she was unwilling to repeat Labours election pledge not to raise taxes significantly. Reeves blamed the previous Conservative government and ongoing trade frictions for damaging the UK economy.

As of 11:16 GMT, the U.S. Dollar Index was steady at 100.2 points, after recording a high of 100.2 and a low of 100.06.