Dollar Dips Amid U.S. Government Shutdown Concerns

The U.S. dollar weakened on Tuesday as concerns over a potential government shutdown overshadowed the market. Investors braced for possible delays in the release of crucial jobs data due to looming government funding issues. Meanwhile, the Australian dollar climbed 0.49% to $0.66075 after the Reserve Bank of Australia maintained steady interest rates and signaled a cautious outlook on inflation.

This year, the RBA's rate cuts occurred in February, May, and August, with little expectation for easing this week despite high consumer prices. The central bank leaned hawkish due to recent economic data surprises. Subadra Rajappa of Société Générale warned that the initial market response to a shutdown could see risky assets sell off and Treasury yields drop.

With the U.S. Labor and Commerce departments halting economic data releases if a shutdown occurs, crucial employment figures could be postponed. The Federal Reserve, set to make decisions on monetary policy, could face challenges with a lack of up-to-date labor market data. The potential for prolonged government inactivity raises the chance for more accommodative monetary policy, putting the dollar at risk.

(With inputs from agencies.)