Dollar drops against yen and euro

Published: 18 Oct at 9 AM Tags: Euro, Dollar,

The US dollar has been dragged back down to its lowest level in eight months as analysts assess just how damaging the government shutdown in Washington has been to the country’s economy. It is now unlikely that the Federal Reserve will begin to taper its massive bond buying programme before the end of this year.

An eleventh-hour deal was reached on Wednesday by Democrat and Republican Senators that will see the government given funds until 15 January and the borrowing ceiling pushed up until 7 February.

Although the first set of economic data released yesterday was generally positive, all eyes will now be fixed on next Tuesday’s job statistics for September. The dollar index is currently up slightly from Thursday’s low of 79.613 to 79.693.

The euro has managed to make significant gains and yesterday came close to hitting this year’s high of $1.3711 at $1.3682. The single currency is currently worth $1.3669. The euro is also close to a four-year high against its Japanese rival at 134.02 yen.

The dollar has fallen against the yen from Thursday’s three-week high of 99.01 yen back to 98.01 yen. Some traders are concerned that the long-term attractiveness of the US currency may have been damaged as none of the issues that caused government to shut down have actually been resolved meaning the US could go through exactly the same thing at the start of the New Year.