US dollar rebounds from 8-month low
The US dollar rebounded from an eight-month low against a basket of its peers amid growing tensions in Washington on how to fund the government. The oversold safe haven broke a five-day losing streak, rallying half a percent to 80.11.
The greenback struggled for support all week as the US budget impasse dragged on. A batch of data reports from the United States and Europe also served to weaken the US dollar against major rivals.
The combination of weak service sector growth and ongoing government stalemate instigated fears of a potential recession in the fourth quarter. The fears receded Friday, despite the growing likelihood the partial shutdown will extend into next week. Analysts project a partial shutdown lasting one-week will cost the US economy a fraction of a percentage point in GDP growth.
The greenback stormed back against the euro, sending the common currency back down to 1.3560 US dollars. The EURUSD shaved half a percent off its trade value despite growing confidence in euro area recovery. The currency bloc reported solid manufacturing and non-manufacturing growth in September, according to Markit Group’s monthly PMI readings.
The British pound declined more than 0.8 percent after shattering a recent nine-month high earlier in the week, consolidating closer to the 1.6020 region. The pair remains well supported as UK fundamentals continue to impress market participants. Over the past several weeks the British pound has easily become the best performing developed currency of the past six months.
The greenback consolidated higher against the Japanese yen after a rocky Asian session, but wasn’t quite as lucky against its northern counterpart, the loonie. The USDCAD fell through the 1.03 handle following mostly positive Canadian PMI data. The Ivey PMI reading for September was a seasonally adjusted 51.9, up from the previous month’s reading of 51.0.
The US dollar will continue to face strong headwinds should Democrats and Republicans fail to reach an agreement to end the first government shutdown in 17 years.
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