Dollar drops on US government agreement

Published: 17 Oct at 10 AM Tags: Euro, Dollar,

The US dollar has dropped following a last minute deal in Washington to avoid a debt default. Business and investor confidence has been damaged by two weeks of government shutdown and the economic growth of the world’s largest economy dented.

It is now unlikely that the Federal Reserve will pull in its massive bond buying programme until next year.

The dollar index fell 0.2 per cent to 80.304 after hitting its highest level in a month yesterday. Against the yen the dollar has slipped from a high of 99.01 to 98.40 yen. Although a deal has been agreed by Republicans and Democrats, it is only temporary and the issues that divide Congress remain.

President Barack Obama has signed a spending measure that will keep government funded up until 15 January. The debt ceiling has also been raised until 7 February. This means that the government could once again go into shutdown at the beginning of next year.

The euro is currently up 0.2 per cent against the dollar to $1.35570. The commodity currencies are also doing well with the Australian dollar and New Zealand dollar both up. The Aussie is currently trading at $0.9550 and likely to climb if the Fed keeps to its easy money policy