U.S. dollar steady as government shutdown ends

The dollar index was at 97.33, not far from the one-week high of 97.73 it hit on Monday

The U.S. dollar was steady on Wednesday as investors remained cautious after a partial government shutdown swiftly ended.

Currency markets were still digesting Kevin Warsh’s nomination by U.S. President Donald Trump as the next central bank chief, with the dollar broadly firming on expectations that Warsh is unlikely to push for rapid rate cuts.

Investors have also been relieved as the appointment eased some of the concerns over the central bank’s independence after Trump’s constant attacks on the central bank and current central bank Chair Jerome Powell.

The euro was a shade stronger at $1.1834, while sterling stood at $1.3715, steady ahead of policy meetings at the European Central Bank and the Bank of England on Thursday. Both central banks are expected to stand pat on rates.

The dollar index was at 97.33, not far from the one-week high of 97.73 it hit on Monday. The dollar strength since the Warsh announcement wreaked havoc in precious metals although they have since recovered somewhat.

The dollar index dropped 1% in January after declining 9.4% last year due to the central bank cutting rates, shrinking interest differentials with other major currencies and as concerns about U.S. fiscal deficits and political uncertainty swirled.

UOB strategists said volatility will likely stay elevated in the run-up to Warsh’s appointment. This will likely include lots of theatrics during the upcoming Congress confirmation proceedings which may not be a straight-forward process, they said in a note on Wednesday.

They added: In-between a jittery market and an assertive President, the work cuts out for Warsh who needs to prove that he is an objective and steady Fed chair who is able to galvanize the entire FOMC.