Newly approved funding agreement brought U.S. dollar close to a three-year low

Dollar index

The U.S. dollar trimmed its losses from yesterday as it held steady on Tuesday’s trade, following the released news that suggested Senators in the United States have reached a short-term compromise to end the government shutdown that started last week. However, the currency is currently not that far from a three-year low versus its peers.

The index which measures the value of the greenback against its major opposing currencies, the U.S. dollar index, was last seen at 90.36. The index hovered close to its weakest level in three years notched last January 17.

The U.S. dollar bounced back against its Japanese counterpart at 110.90 yen after starting the week already above its four-month high of 110.19 reached last Wednesday.

In relation to the dollar’s recent movement, the U.S. House of Representatives signed a deal on the previous day that will provide funds for the federal government until February 8. This came in after the agreement won the support of the Senate on the same day.

Given that the Democrats and Republicans are still loggerheads on a lot of issues, the strengthening of the agreement was only temporary due to the measure secured only minimal fundings in more than two weeks.

According to some traders, one of the reasons for dollar’s downturn is due to its relative yield attraction. It is currently at risk because major central banks around the world are all expected to trim their massive bond portfolios. This can potentially alter the dynamics of interest rate hikes, especially when the U.S. Federal Reserve is the only one lifting rates.

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