Dollar slips on U.S. debt impasse

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Dollar slips on U.S. debt impasse

Post by Shirley on Mon Jul 25, 2011 8:45 am

July 25, 2011, 8:09 a.m. EDT

Dollar slips on U.S. debt impasse

Swiss franc, yen rise on safe-haven flows

By William L. Watts and Lisa Twaronite, MarketWatch

FRANKFURT (MarketWatch) — The dollar remained weaker versus most major rivals Monday, as the deadlocked U.S. debt-ceiling talks yielded few signs of progress, boosting safe-haven currencies such as the Swiss franc and the Japanese yen.

The dollar index /quotes/zigman/1652083 DXY -0.15% , which tracks the U.S. unit’s performance against a basket of six other currencies, bought 74.145, down from 74.221 late Friday.

The dollar fell to an all-time low of 80.18 centimes versus the Swiss franc /quotes/zigman/4868123/sampled USDCHF -0.93% and traded at 80.49 Swiss centimes in recent action, down 1.1% from Friday. There are 100 centimes in a Swiss franc.

Against the Japanese yen, the dollar /quotes/zigman/4868099/sampled USDJPY -0.13% traded at ¥78.24, down from ¥78.47 late Friday.

“Price action in the FX [foreign-exchange] majors looks like a miniature version of how things would probably look if we were to get to Aug. 2 without agreement and the U.S. goes into technical default (still an unlikely scenario in our view),” wrote Adam Cole, head of global FX strategy at RBC Capital Markets in London.

The euro /quotes/zigman/4867933/sampled EURUSD -0.10% was up slightly versus the dollar, rising to $1.4371 from $1.4365 in late North American trading on Friday. See real-time currency quotes and tools.

Upside for the euro was capped by lingering nervousness over the European sovereign debt crisis, analysts said.

“The [euro/dollar] inability to hold gains above $1.44 ultimately spurred some retreat after a more cautious evaluation of the recent EU [European Union] agreement,“ wrote strategists at UniCredit Bank in Milan. “Yet, only a break below $1.4250 may halt the recent rally.”

Moody’s Investors Service on Monday cut Greece’s credit rating three notches and said default is almost certain when private bond investors take part in a debt exchange under the nation’s most recent bailout.

The company said the bailout plan approved by European leaders next week was a positive for other euro-zone countries in that it would allow Greece to avoid a disorderly default, but said the precedent set by the debt exchange rendered the plan credit-neutral for holders of Portuguese and Irish debt, while leaving negative implications for holders of other non-AAA government debt in the euro zone. Read about the Moody’s move.

/quotes/zigman/4868123/sampled USDCHF 0.8044, -0.0075, -0.9258%

Throughout the weekend, U.S. lawmakers and White House officials were optimistic a deal would be reached before the opening of Asian trading Monday morning. However, no word of an agreement had materialized as of the Tokyo market open.

Late Sunday, President Barack Obama was meeting with Democratic leaders, and House Speaker John Boehner reportedly told colleagues he was still working on a two-stage plan. Read more on U.S. debt-ceiling talks.

Both Moody’s Investors Service and Standard & Poor’s have placed their credit ratings on U.S. debt on review for a potential downgrade.

Earlier Monday, the dollar slipped to ¥78.10, its lowest level in about four months. Japanese Finance Minister Yoshihiko Noda told reporters he was closely watching movements in the currency market, as well as the U.S. debt-ceiling talks, according to media reports.

The British pound /quotes/zigman/4867886/sampled GBPUSD -0.31% bought $1.6289, down from $1.6304 late Friday, and the Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.04% changed hands at $1.0840, compared with $1.0860.
add Add DXY to portfolio DXY
U.S. Dollar Index (DXY)
-0.11 -0.14%
Volume: 0.00
July 25, 2011 8:35a
add Add USDCHF to portfolio USDCHF
-0.0075 -0.9258%
Volume: 0.0000
July 25, 2011 12:43p
add Add USDJPY to portfolio USDJPY
-0.1000 -0.1277%
Volume: 0.0000
July 25, 2011 12:43p
add Add EURUSD to portfolio EURUSD
-0.0014 -0.0964%
Volume: 0.0000
July 25, 2011 12:43p
add Add GBPUSD to portfolio GBPUSD
-0.0051 -0.3092%
Volume: 0.0000
July 25, 2011 12:43p
add Add AUDUSD to portfolio AUDUSD
-0.0004 -0.0369%
Volume: 0.0000
July 25, 2011 12:43p

William L. Watts is a reporter for MarketWatch in Frankfurt. Lisa Twaronite is MarketWatch's Tokyo bureau chief.

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