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US dollar hits monthly low on Fed speculation

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US dollar hits monthly low on Fed speculation

The US dollar fell to a monthly low amid speculation the Federal Reserve will refrain from scaling back asset purchases due to the economic impact of the 16-day impasse.

The US dollar index declined 1 percent to 79.70 one day after bipartisan Senate leaders struck an accord to lift the budget impasse and reopen government. The 16-day shutdown cost the United States economy $24 billion, according to Standard & Poor’s Rating Service. The economic impact of the government closure likely means the Federal Reserve will maintain the pace of its $85 billion monthly asset purchases. The budget impasse, which started October 1, disrupted an already fragile US recovery.

Several organizations, including the S&P, have downgraded their fourth quarter GDP forecasts for the US.

The US dollar fell more than 0.3 percent against its northern counterpart, the loonie, sending the North American pair to its lowest trade in over three weeks. The USDCAD hit a session low of 1.0280 in North America. The down-under currencies both advanced against the greenback, as investors searched for riskier bets. The Australian dollar advanced more than 0.7 percent against its American counterpart.

In Europe, the common currency advanced 1 percent against the greenback, as market participants bet against tighter Fed policy. The British pound reacted to better-than-forecasted retail sector growth, which helped propel the GBPUSD to 1.6165, a gain of more than 1.3 percent. In the European session the Office for National Statistics reported retail sales advanced 0.6 percent in September and at an annualized rate of 2.2 percent.

In Asia, the Japanese yen advanced more than 0.9 percent, as the USDJPY fell through three intraday supports on its way to 97.9. Bank of Japan Governor Haruhiko Kuroda will make headlines Friday when he speaks at the annual meeting of credit cooperatives held in Tokyo.

It remains unclear when market participants can expect the US government to release shutdown-delayed economic data, which includes monthly CPI, retail sales, housing starts and nonfarm payrolls. According to Bank of Nova Scotia economist Derek Holt, federal departments have been instructed to resume operations in a “prompt and orderly manner.”

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