Against the yen, the dollar was up 0.5% at ¥154.22, back threatening the nine-month highs it reached earlier in the month.
The Aussie dollar was up 0.55% on the dollar at US$0.6532 and up more than 1% on the yen. That pair is sometimes used as a barometer of sentiment towards global growth, and often moves in line with equity markets, which were higher on Monday.
“The archetypal ‘risk on’ trade at the moment is the Australian dollar/Japanese yen cross,” said Kit Juckes, chief FX strategist at Societe Generale.
The US Senate on Sunday moved forward on a measure aimed at reopening the federal government and ending the shutdown. While it was a procedural vote, a handful of Democrat lawmakers have agreed a deal with the Republicans, and President Donald Trump said it looked “like we’re getting very close to the shutdown ending”.
On the prediction market Polymarket, the implied probability that the shutdown would end before Nov 15 surged to 92%.
Were the shutdown to be lifted the focus would shift to US economic data, particularly non-farm payrolls data, which has not been released since government operations ground to a halt more than a month ago.
Market pricing currently reflects around a 60% chance of a Federal Reserve interest rate cut in December, although that pricing could shift sharply in either direction once the data comes through.
“I’m worried that, at least in the first instance, when we get enough data it will be a slightly damp squib for the US economy,” said Juckes.
But the uncertainty kept the dollar in check against European currencies. The euro was last at US$1.1558, sterling at US$1.3163 and the Swiss franc at 0.8062 per dollar, all effectively flat on the day.
There were also domestic factors shaping both the yen and Aussie dollar.
Japanese Prime Minister Sanae Takaichi on Monday said she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down the country’s commitment to fiscal consolidation.
Separately, the Bank of Japan’s summary of opinions on Monday also said that the “fog surrounding Japan’s economic outlook has begun to clear compared with July,” potentially paving the way for a rate hike in December, which would help support the currency.
“There is over-excitement that this will be complete Abenomics. We are expecting another hike by the BOJ,” said Salman Ahmed, global head of macro and strategic asset allocation, at Fidelity.
Meanwhile Reserve Bank of Australia Deputy Governor Andrew Hauser said in a speech that the country’s financial conditions are closer to a neutral rate of interest — one that is neither stimulative nor a drag on the economy.
“The speech, which came across as hawkish, propelled the Australian dollar higher,” said analysts at Westpac in a note.
Back in Europe, a rare mover was the Norwegian crown, which strengthened after data showed the country’s core inflation rose unexpectedly in October, limiting the room for more rate cuts by its central bank.
The dollar was last down 0.44% on the crown at 10.11 crowns, and the euro shed a similar amount to 11.7 crowns.