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US dollar falls as government shutdown enters second day

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US dollar falls as government shutdown enters second day

The US dollar fell sharply against a basket of its major competitors, sending the US dollar index to a session low of 79.78. The greenback fell more than 0.3 percent as the budget impasse halted government activity for the second consecutive day, with Republicans and Democrats gridlocked over how to fund the federal government.

Repeated efforts to end the budget impasse failed leading up to the October 1 deadline. On Tuesday House Republicans were unable to sway Democrats to agree to several stopgaps that would fund a handful of federal agencies until mid-December, extending the government’s first partial shutdown in 17 years. President Barrack Obama and opponents are at odds over how to fund the Affordable Care Act, a landmark healthcare measure promising to extend coverage to millions of uninsured Americans.

The US dollar was on the defensive in the Asian session, where it lost more than 0.6 percent against the yen, sending USDJPY to 96.40. In Japan, the monetary base continues to rise, climbing 4.1 percentage points in September to beat estimates. In the United States, weaker-than-forecasted employment growth kept the pair under pressure for most of the North American session.

The dollar fell sharply in Europe as well, declining more than 0.2 percent against the British pound after the UK construction sector continued to strengthen. Sterling surpassed 1.62 US dollars to settle at 1.6225. The euro soared more than 0.4 percent to 1.3586 after surpassing the 1.36 handle early in the North American trade. The common currency was supported after the European Central Bank kept its benchmark lending rate unchanged at 0.5 percent.

The greenback traded within a narrow range against its northern counterpart, the loonie, whose idleness helped keep USDCAD at bay. The USDCAD declined fractionally in the North American session, settling at 1.0330.

Earlier this week the Labor Department said it would not release economic data amid a partial government shutdown, rendering Friday’s nonfarm payroll report obsolete. US dollar pairs will remain active in response to the ISM services report Thursday, followed by several speeches from Federal Reserve officials to close out the week.

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