Dollar recovers slightly

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

Although the US dollar remains close to its lowest level in eight months against a basket of other currencies some relief was given by news that President Barack Obama is supporting Janet Yellen, Federal Reserve Vice Chairwoman, for the central bank’s top job. Ben Bernanke, the current chairman, is due to step down at the end of January.

The greenback is up 0.5 per cent against the safe haven yen to 97.38 yen after hitting a low on Tuesday of 96.55 yen. The euro has dropped slightly to $1.3563. Because the yen has weakened slightly the dollar index is up 0.1 per cent to 80.128.

Analysts believe the appetite for risk will not last as Congress continues to fail to reach an agreement over the government’s borrowing limit. The initial deadline for an agreement is 17 October after which the US could face its first ever debt default. Washington is already in its second week of shutdown because of the impasse.
If the US does default on its obligations the dollar is likely to perform badly compared to the Swiss franc and the yen, both safe haven currencies. However even the greenback is unlikely to be hammered as hard as the emerging market currencies.

A decision in September by the Federal Reserve to remain cautious about reining in its monetary stimulus programme appears to have been validated by the current situation.