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US dollar falls as budget impasse continues

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US dollar falls as budget impasse continues

The US dollar opened the week entrenched in negative territory after barely clinging to 80.0 against a basket of its major peers. The dollar has weakened considerably following the partial shutdown of the US federal government, now entering its second week. The dollar index fell more than a quarter percent to 79.90, after hitting a low of 79.66 last week.

The US dollar weakened in Asia, falling below 97.00 yen. The USDJPY has fallen more than 1.3 percent over the past five days, as the yen continues to gain on the debt ceiling debate. The partial US government shutdown has made the yen the safe haven of choice, as the debt obstacle continues to weigh down demand for the US dollar.

The euro continued to pull ahead, reaching a session high of 1.3591 before consolidating on a gain of more than 0.1 percent. The EURUSD pair advanced modestly despite a weaker-than-expected economic confidence report from Sentix. Several batches of data from Germany, the currency bloc’s largest member, are expected this week, including monthly reports on factory orders and trade.

Elsewhere in Europe, the British pound continued to move ahead of its American counterpart, advancing more than 0.4 percent to re-test 1.61. In the absence of US data due to the budget impasse, the GBPUSD will be driven by multiple UK data releases this week, followed by the Bank of England rate decision Thursday. The central bank is expected to hold its benchmark lending rate and asset purchase facility steady at 0.5 percent and £375 billion, respectively.

The dollar’s lone victory came against its northern counterpart, the Canadian loonie, which fell in the North American session after Statistics Canada reported huge declines in building permits last month. The USDCAD regained the 1.03 line, advancing almost 0.2 percent.

With no relief to the budget impasse in sight, the US dollar will have a difficult time remaining level in a market tipping in its opponents’ favour.

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