News / Economy

US Dollar Bounces From 8-Month Low, Shutdown Limits Upside

Businessmen are reflected on a board showing the U.S. NASDAQ average outside a brokerage in Tokyo, Oct. 1, 2013.
Businessmen are reflected on a board showing the U.S. NASDAQ average outside a brokerage in Tokyo, Oct. 1, 2013.
Reuters
— The dollar rose against a basket of major currencies on Friday after five straight sessions of losses but remained within striking distance of an eight-month low hit the previous day, as the U.S. government closure continued.
 
The shutdown of the U.S. government appeared likely to drag on for another week and possibly longer as lawmakers consumed day three of the shutdown on Thursday with a stalling game, and with no end in sight until the next crisis hits Washington around Oct. 17.
 
October 17 is the date Congress must raise the nation's borrowing authority or risk default, and members of Congress now expect it to be the flashpoint for a larger clash over the U.S. budget as well as President Barack Obama's healthcare law.
 
The U.S. dollar index, which tracks the greenback against six major currencies, last traded up 0.3 percent at 79.994, but not far from Thursday's eight-month low of 79.627. The euro, which traded weaker, dominates the composition of the index.
 
The greenback's gains were pronounced against the Swiss franc, rebounding from a 1-1/2 year low reached the previous day. The Swissie was weighed by news that Switzerland's financial markets regulator is investigating several Swiss banks in connection with the possible manipulation of foreign exchange rates.
 
“So far markets have mostly treated [the government shutdown] as a U.S.-centric growth shock from fiscal/confidence effects, rather than as a tail-risk shock to market risk,” said Dan Dorrow, foreign exchange strategist at Faros Trading.
 
“The present state of things is emerging market risk-positive as it keeps hyper-accommodative Federal Reserve  stimulating flows into emerging markets,” he said.
 
The euro fell 0.3 percent to $1.3584, but not far from a peak of $1.3645 reached on Thursday, which marked its highest since February. It has risen nearly 0.5 percent on the dollar so far this week.
 
Analysts predicted minor setbacks and some consolidation for the euro going into the weekend after its recent ascent. Real money accounts were cited as main sellers of the pair taking it below the $1.3600 mark.
 
“No one wants to touch the dollar while we have uncertainties regarding the U.S. government shutdown. We also had a disappointing service sector number and that also added to the negative dollar sentiment,” said Niels Christensen, FX strategist at Nordea.
 
The government shutdown has led the U.S. Labor Department to delay the employment report for September, which was scheduled for Friday. No new date was set for the release of the data.
 
Thus, any confirmation of an improving labor market that the Federal Reserve wants to see before cutting its stimulus will likely be delayed, hurting the dollar. Two senior Fed officials said monetary policy was being kept easier to help offset the harm caused by political fighting.
 
“Those who have been expecting [Fed tapering] in October should be having a bit of panic now. Those who have bet on December may be worried too,” said Katsunori Kitakura, associate manager of market making at Sumitomo Mitsui Trust Bank.
 
Meanwhile, the resolution of Italy's latest political crisis, the European Central Bank refraining from any immediate policy action to help the economy, and this week's data all supported the euro this week.
 
But Sara Yates, global currency strategist at JPMorgan Private Bank said the prospect of the Fed eventually trimming its bond purchase program could push benchmark U.S. 10-year Treasury yields to 3.0 percent or higher next year and support the dollar.
 
At the same time “sentiment towards Europe will likely improve but the ECB will stand ready to ease policy to stop financial conditions from tightening too much,” she said, adding in such a case the euro could target the $1.28 mark.
 
The dollar was down 0.1 percent against the yen at 97.14 yen after the Bank of Japan kept rates on hold as was widely expected.

You May Like

Video On the Scene: In Gaza, Darkness Brings Dread and Death

Palestinians fear nighttime raids, many feel abandoned by outside world, VOA's Scott Bobb reports More

African Small Farmers Could Be Key to Ending Food Insecurity

Experts say providing access to microloans, crop insurance, better storage facilities, irrigation, road systems and market information could enable greater production More

University of Michigan Wins Solar Car Race

Squad guided its student-designed solar-powered vehicle to fifth consecutive time victory in eight-day bi-annual American Solar Challenge More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Gazans in Shelled School Sought Shelteri
X
Scott Bobb
July 30, 2014 8:16 PM
Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video A Summer Camp for All the World

VIDEO: During workshops and social gatherings, the Global Youth Village summer camp encourages young people to cooperate and embrace their differences, while learning to communicate with people from other countries. VOA's Deborah Block has more.
Video

Video From Cantankerous Warlock to Incorruptible Priest, 'Harry Potter' Actor Embraces Diverse Roles

He’s perhaps best known as Mad Eye Moody, the whimsical wizard in the Harry Potter franchise. But character actor Brendan Gleeson's resume includes dozens of films, and he embraces all the characters he inhabits with equal passion. In an interview with VOA’s Penelope Poulou, Gleeson discussed his new drama "Calvary" and his secret to success.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.