The dollar nursed losses near an eight-month low against a basket of currencies on Friday as traders focused on the economic impact of an acrimonious showdown in Washington that dragged the U.S. to the brink of a debt default.
The potential damage to the economy from the weeks-long government shutdown could discourage the Federal Reserve from scaling back its stimulus program at least until the beginning of next year.
“The markets are driven by expectations that the Fed will have to maintain its stimulus,” said Sho Aoyama, senior market analyst at Mizuho Securities. U.S. Democrats and Republicans reached an 11th-hour agreement on Wednesday to break the fiscal impasse. But the deal only funds the government until Jan. 15 and raises the borrowing limit through to Feb. 7.
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