The dollar fell to the lowest since Jan. 3 versus the pound after a partial shutdown of the U.S. government began with Congress in partisan dead-lock.
The U.S. currency weakened against most major peers as the wrangling between Senate Democrats and House Republicans threatened to stunt growth at a time when the central bank is weighing a tapering of stimulus. The yen fell briefly after the Bank of Japan’s quarterly Tankan survey beat economists’ estimates, and Prime Minister Shinzo Abe said the sales tax would rise to 8 percent in April. Australia’s dollar strengthened after the Reserve Bank kept interest rates unchanged.
“Any undue fiscal drag coming from the shutdown would imply tapering that is further away and that’s probably a U.S. dollar negative,” said Andrew Salter, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The yen, the pound and, to a lesser extent, the euro have all benefited from the uncertainty as those currencies are reserve currencies with financial markets that can accommodate a flight to quality.”
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