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Dollar falls after US shutdown Dollar falls after US shutdown
(about 1 hour later)
The dollar has fallen against a range of currencies, driven by fears that a partial shutdown of the US government will hit the country's economy.The dollar has fallen against a range of currencies, driven by fears that a partial shutdown of the US government will hit the country's economy.
Analysts said the fall in the dollar had not been more pronounced as the shutdown had been expected.
The shutdown began after the two houses of Congress failed to agree a budget.The shutdown began after the two houses of Congress failed to agree a budget.
More than 700,000 US government workers face unpaid leave with no guarantee of back pay once the deadlock is over.
The dollar fell to an eight-month low against the euro and a one-and-a-half year low against the Swiss franc, which is seen as a haven currency.The dollar fell to an eight-month low against the euro and a one-and-a-half year low against the Swiss franc, which is seen as a haven currency.
It also weakened against the Japanese yen, and fell back against the pound.It also weakened against the Japanese yen, and fell back against the pound.
Swift resolution Debt ceiling
Analysts said the fall in the dollar had not been more pronounced as the shutdown was expected and investors hoped there would be a swift resolution to the impasse.
Previously US government shutdowns have lasted anywhere between a day and a month.Previously US government shutdowns have lasted anywhere between a day and a month.
Mike van Dulken, head of research at Accendo Markets, said the bigger worry was US politicians not being able to agree on lifting the so-called "debt ceiling". The economic impact will depend on how long the deadlock lasts, but Goldman Sachs estimates a three-week shutdown could shave as much as 0.9% from US GDP this quarter.
Mike van Dulken, head of research at Accendo Markets, said the bigger worry was US politicians not being able to agree on lifting the so-called "debt ceiling", when the US government will reach the limit at which it can borrow money to pay its bills.
"The longer this goes unresolved, the closer it takes us to the 17 October debt ceiling, when there is no money to pay bills including sovereign debt - debt default is an altogether different issue," he said."The longer this goes unresolved, the closer it takes us to the 17 October debt ceiling, when there is no money to pay bills including sovereign debt - debt default is an altogether different issue," he said.
There are also concerns that markets will be affected by a possible delay in the release of key US economic data.There are also concerns that markets will be affected by a possible delay in the release of key US economic data.
Some press reports have said the US Labor Department will not release its employment report, which is due on Friday.Some press reports have said the US Labor Department will not release its employment report, which is due on Friday.
Joe Rundle, head of trading at ETX Capital, said the shutdown could mean Federal Reserve policy makers holding off cutting back on their $85bn-dollar-a-month economic stimulus programme at their October policy meeting.
"Liquidity addicted market participants appear to be relatively sanguine this morning, hoping that this shutdown could go as far as seeing the Fed hold back from tapering all together in 2013," he said.