The US dollar rose against most major currencies during Mondays trading as the government shutdown in the United States continued, with no sign of resolution in sight, prompting investors to move toward safe-haven assets such as the dollar and gold.

Reports over the weekend indicated that there was little progress toward ending the government shutdown in the United States, meaning further delays in the release of official economic data. It is likely that the foreign exchange market (forex) will witness another week of volatility, as the suspension of most economic data releases shifts the focus toward other macroeconomic developments.

In general, the longer the US government shutdown lasts, the greater the potential pressure on the US dollar. However, the greenback has so far shown remarkable resilience, which according to Francesco Pesoli, currency analyst at ING Bank confirms that markets have already raised the bar significantly for how bad the US economic news would need to be to prompt investors to increase short positions on the dollar.

The dollar index rose by 0.7% at 12:20 GMT to 98.3 points, recording a high of 98.5 points and a low of 97.9 points.

Local Stories May Lead G10 Currency Movements

Pesoli said: Market pricing for Federal Reserve rate cuts in December remains slightly below 50 basis points (around 46 basis points this morning), which is close to the median projection in the Feds Dot Plot. The event likely to have the biggest impact on markets this week will be the release of the minutes of the September meeting of the Federal Reserve on Wednesday.

He added: We will look in the minutes for signs that the cautious tone expressed by Fed Chair Jerome Powell regarding further rate cuts is shared by most members of the Federal Open Market Committee (FOMC). The risks appear to be tilted slightly toward the dovish side, which could lead to a mild negative reaction in the dollar. Therefore, we expect the dollar to remain relatively stable in the coming days, though downside risks persist. However, domestic stories could be the main driver for other G10 currencies, as we are currently seeing in Japan.

The Japanese Yen May Regain Advantage if the US Shutdown Persists

Pesoli said: We do not see much room for further upside in the USD/JPY pair from current levels. A much weaker yen would increase concerns about living costs in Japan, and continued strength in the pair could create friction with Washington. Therefore, the yen may remain a preferred option if the US government shutdown continues for an extended period. We view the move above the 150.0 level in USD/JPY as temporary rather than the beginning of a sustained uptrend.

A Busy Week of Central Bank Officials Speeches

The report noted that this week will be busy with speeches from central bank officials of the G10 economies. Jerome Powell will deliver an opening speech on Thursday at the Federal Reserves Community Banking Conference, alongside other members of the Federal Open Market Committee (FOMC), including Michelle Bowman.

Speeches will also be heard from the heads of the European Central Bank and the Bank of England (both today), Norges Bank on Tuesday, and the Reserve Bank of Australia on Friday, along with additional remarks from several Fed officials throughout the week.

Meanwhile, the Reserve Bank of New Zealand will announce its monetary policy decision on Wednesday, with expectations pointing to a 25-basis-point interest rate cut.