Group 1 - The dollar reached its strongest level in two months due to political risks abroad and a lack of US economic data [1] - The Bloomberg Dollar Spot Index remained flat after gains were erased by dovish comments from the Federal Reserve Bank of New York President John Williams, who supports further interest-rate cuts [2] - Demand for dollar-bullish structures has outpaced bearish ones, indicating a shift in market sentiment favoring the dollar [3] Group 2 - The US government shutdown has muted concerns about a softening labor market, reducing incentives for traders to sell the dollar [4] - Political risks in Japan and France have led to a repositioning in major currencies, with hedge funds closing short-dollar positions and showing interest in bullish exposure [5] - Hedge funds in Europe and Asia are increasing option trades, anticipating a weakening of currencies like the euro and yen against the dollar [6]

Core Viewpoint - The dollar is nearing a two-month high due to fiscal and economic concerns affecting currencies in Asia and Europe, with hedge funds increasing bearish bets on the euro and yen while showing demand for long-dollar exposure [1][2][3] Currency Performance - The Bloomberg Dollar Spot Index rose by as much as 0.3%, approaching its highest level since early August, driven by increased bearish options on the euro and yen [1][4] - The dollar has strengthened nearly 1% since the end of September, reducing its year-to-date decline to approximately 7.6% [5] Global Economic Concerns - The euro is under pressure due to political turmoil in France, while the yen has weakened amid speculation of increased fiscal expansion and slower interest-rate hikes in Japan [2][3] - Concerns regarding fiscal sustainability in Japan and France have led to a reassessment of the US macro outlook, with traders viewing the US as a relatively stable option despite the government shutdown [3] Market Sentiment - There is a notable shift in market sentiment towards the US dollar, with one-year risk reversals indicating the highest level of optimism since April, marking a significant turnaround from previous bearish positioning [4] - Despite the recent dollar strength, skepticism remains among market participants regarding the sustainability of this bounce, contributing to increased demand for gold, which recently surpassed $4,000 an ounce [5][6]

Group 1 - The US dollar has dropped to its lowest point in a week due to the first government shutdown in nearly seven years and negative private-sector payroll growth [1][4] - The Bloomberg Dollar Spot Index fell by 0.2% and is on track for a fourth consecutive day of declines, with the yen leading gains against the dollar [1][2] - Traders are preparing for further weakness in the dollar, as indicated by risk reversals showing a preference for bearish trades [2] Group 2 - Private-sector payrolls fell by 32,000 in September, contrasting with an expected increase of 51,000, leading to a downward revision of prior data [4] - Following the negative payroll data, Treasuries gained, with the two-year yield dropping six basis points to 3.55%, and traders are betting on at least two interest-rate cuts from the Federal Reserve this year [5] - A prolonged government shutdown is expected to increase pressure on the dollar, which has already declined to its lowest level since 2022 due to concerns over policy making and escalating deficits [6] Group 3 - The ADP payroll release is significant as it is likely to be the highest profile reading of the US labor market for the week, with the government's jobs report delayed by the shutdown [7]