Dollar slips after lack of progress in Washington

Published: 7 Oct at 9 AM Tags: Euro, Dollar,

A lack of progress in the US at the weekend concerning the budget standoff has left the dollar on the back foot against safe haven currencies the Swiss franc and yen. The dollar index remains close to its lowest level in eight months against a number of major currencies.

Comments on Sunday by John Boehner, Republican House Speaker, that lawmakers are unlikely to agree to push up the debt ceiling without guarantees that deficit spending will be brought down have left many analysts fearing that President Barack Obama will not be able to come to a deal with Congress before the Treasury runs out of cash.

The dollar index has dropped slightly to 80.04, close to last Thursday’s eight-month trough of 79.627. The greenback is also down 0.3 per cent against its Japanese counterpart to 97.20 yen. Forex strategists expect the yen to rise higher if the markets do start to focus on a default.

The dollar slipped 0.2 per cent against the Swiss franc and is currently worth 0.9055 francs. The euro has remained firm at $1.3569 after last week hitting a high of $1.36465. Although the US government is already in shutdown, many experts believe that a last minute deal could be struck in order to avert a default.

Events in Washington also make it unlikely that the Federal Reserve will begin to scale back its bond-buying stimulus programme this month.