US budget deadlock keeps dollar under pressure

Published: 8 Oct at 9 AM Tags: Euro, Dollar,

The US dollar is continuing to struggle to pull away from an eight-month trough against other major currencies as there is still no sign that Congress is close to breaking the budget deadlock. Investors are ignoring the greenback and putting their faith in safe-haven currencies like the Swiss franc and the Japanese yen.

The US government shutdown has now moved into its second week and the 17 October deadline for Congress to agree on a borrowing limit is rapidly approaching. However, neither Democrats nor Republicans are showing any sign that there will be an impending agreement on the debt ceiling or the shutdown.

As the deadline comes closer the Swiss franc and the yen are likely to climb higher, according to most analysts. Although the dollar should begin to do better, pressure will remain as the Federal Reserve is unlikely to begin to trim its massive bond-buying programme while there is turmoil in Washington.

The dollar index is currently down 0.2 per cent to 79.95. Against the yen the dollar fell to 96.79 before recovering a tad to 96.92, a drop of 0.6 per cent. Against the Swiss franc the greenback fell to 0.9032, a loss of 0.4 per cent.

The euro is up $1.3578, an increase of 0.2 per cent and on track to hit last week’s high of $1.3645.