Dollar falls versus yen as US government shuts down

By pierreapienaar on Tue, Oct 1, 2013 - 3:27am

The US dollar fell against the yen early on Tuesday after the US government shutdown deadline passes and Congress was unable to reach a deal on a spending bill. This is the first shutdown in 17 years, since 1997 and it is unclear how long it will last.


The US Congress reached a deadlock as the House of Representatives and the Senate failed to reach and agreement on a spending bill for the new fiscal year which begins today.


This comes a couple of weeks before the US debt ceiling will be reached and puts the US at risk of default. This would have a larger impact on the US economy and the markets.


For today, so far markets have not reacted too much as this shutdown was priced in and do not expect it too last too long. The main focus of the debt ceiling debate is in two weeks.


USDJPY dropped to 97.99, the Asian session low, after hitting as earlier high of 98.71 yen.  The yen bounced back after an earlier downward blip that came after Japan’s Prime Minister Shinzo Abe said he had decided to go ahead with a planned hike in the national sales tax.


Weaker data from China also added to investors’ wariness and increased demand for the safe haven yen.


China’s official Purchasing Managers’ Index (PMI) gave a reading of  51.1 in September from August’s 51.0, below expectations  for a rise to 51.5. This added to concerns that an economic recovery there may be foundering.


The Australian dollar shrugged off the China data and was the best performer after surging on better-than-expected Australian retail sales data. Also the Reserve Bank of Australia kept interest rates unchanged at 2.5 percent.


AUDUSD jumped to a high of $0.9400, up  from an earlier low of $0.9287.


EURUSD opened in Asia at $1.3524 and rose to $1.3551 on  the weaker dollar.


We will have to hold our breath with the impasse on the budget, but not to forget the Syrian problem looms in the background all the time.

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