Dollar Dips Amid Government Shutdown Concerns: Yen and Euro Reactions

The dollar faced pressure on Monday on fears of an impending U.S. government shutdown. As the yen continued to gain against the euro, eyes are set on upcoming U.S. economic data releases that might provide insights into the Federal Reserve's policy decisions.

Investors are factoring in a decrease in anticipated Federal Reserve interest rate cuts, with 110 basis points expected by 2026. The looming government shutdown, set to begin Wednesday if Congress fails to pass a funding bill, adds uncertainty to both market pricing and labor market conditions.

Significantly, there's a legal dispute over Fed Governor Lisa Cook's potential removal which threatens to overshadow shutdown concerns. The Trump administration seeks Supreme Court approval to dismiss Cook, asserting presidential powers, risking further dollar instability if Federal Reserve independence is compromised.

(With inputs from agencies.)