(Bloomberg) -- The dollar 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.

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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 political turmoil while the yen has slumped on speculation that Japan’s likely new leader may favor more fiscal expansion and a slower pace of interest-rate hikes.

“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 deliver a larger-than-usual interest-rate cut and signaled a willingness to ease further.

The Case for a Year-End Dollar Rally Is Building

The Bloomberg dollar gauge has strengthened almost 1% since end-September, paring its year-to-date decline to about 7.5%. The currency has been on the backfoot for most of 2025 due to Federal Reserve easing, the waning pull of US exceptionalism and the growing appeal of gold as a haven play.

The US government shutdown is also expected to be a negative. In the three most recent episodes — in 2013, early 2018 and late 2018 into 2019 — the Bloomberg gauge fell both during the impasse and in the immediate aftermath.

All this is fueling doubt that the greenback will be able to mount a sustained recovery in the coming months.

“There doesn’t seem to be much of a case for the dollar to be bought against other currencies,” said Rikiya Takebe, a senior strategist at Okasan Securities Co. in Tokyo. “In addition to the US leaning toward rate cuts, President Trump is fundamentally not a fan of a strong dollar.”

Overnight-indexed swaps have fully priced in four Fed interest-rate cuts totaling 1% point by September 2026.

(Updates with analyst comment, background and swap pricing in final four paragraphs)

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