Dollar Tiptoes Toward Two-Month High as Global Fiscal Woes Mount

The approached a two-month high on Wednesday as fiscal and economic concerns from Asia Pacific to Europe weighed on the currencies of its Group-of-10 peers.

The Bloomberg Dollar Spot Index advanced 0.2% to come within striking distance of its highest since early August. The move was helped by hedge funds buying more bearish option bets against the euro and yen, according to Asia-based traders.

After tumbling to the lowest in over two years in September, the US currency has seen its fortunes revive in recent days as a slew of negative factors elsewhere outweighs any negative impact from the US government shutdown. The euro has been hit by France’s while the yen has slumped on speculation that Japan’s likely new leader may favor a of interest-rate hikes and more fiscal expansion.

“Considering mounting concerns on fiscal sustainability in Japan and France, the market is now re-assessing their views on the US macro outlook,” said Eugenia Fabon Victorino , head of Asia strategy at Skandinaviska Enskilda Banken. “Despite the ongoing US government shutdown, traders are ironically looking at the US as the least ugly situation.”

The greenback got an additional boost Wednesday as the New Zealand dollar tumbled to a six-month low after its central bank by more than expected and signaled a willingness for further cuts.