Is the opportunity for the dollar to peak?

While the dollar is on track for its longest one-day rally in a year, Kit Juckes, chief currency strategist at Socie ́ te ́ Ge ́ ne ́ rale in London, said:If the U.S. government shutdown lasts longer than a week or two, the dollar could peak.

Because Congress has been unable to reach a deal to avert a partial shutdown of the federal government on Oct. 1, it would leave everything from Musk's SpaceX to federal contractors who clean federal buildings with up to $1.90 billion a day in losses or delayed payments, and fuel concerns about rising long-term interest rates and still-high inflation.

Mr. Juckes said an extended shutdown would be "enough to break the doom cycle of rising yields, a rising dollar and still good economic data".

heThis situation is expected to cause the Bloomberg Dollar Spot Index to fall by 3% by the end of the year.The index rose for a sixth straight day on Wednesday, hitting its highest level since December. A strong dollar storm is sweeping global markets and prompting Asian monetary officials to take action to protect their currencies, driven by the Federal Reserve's efforts to tighten policy and the resilience of the U.S. economy, which has outpaced other major economies.

For Juckes, the government shutdown causing the dollar to fall is just the beginning of a much bigger slumpAs the Federal Reserve turns to rate cuts, the currency's decline will accelerate in 2024。

"When the dust settles, the outlook for the US weakens and the Fed moves to more accommodative policy, broad dollar weakness will come," said Mr. Juckes. "This shift will take time, so my core view is that the dollar will turn sometime in the first half of next year."

Any safe-haven demand from the shutdown will only temporarily boost the dollar, he said. While "the shutdown looks like it will strengthen the dollar," he saidIn fact, it will ultimately weaken the dollarBecause the government will have to give up the generous fiscal spending that has provided the funds to keep the U.S. economy growing longer than other countries. "