Dollar falls to eight-month low against euro
NEW YORK (Oct 3) The dollar hit an eight-month low against the euro on Thursday as investors grew more concerned about the economic effects of a prolonged shutdown and debt-ceiling debate.
A failure to raise the debt limit by Oct. 17 could lead to a financial crisis worse than the one in 2008, the Treasury Department said Thursday. Separately, the Labor Department said the jobs report won’t be released Friday because of a lapse of funding.
That makes it even more likely that the Federal Reserve will hold monetary policy steady at its October meeting, since the central bank closely watches labor-market data in making its decision. The Fed’s current bond purchases of $85 billion a month are understood to weigh on the U.S. dollar.
“Generally, it’s not the closure of the government itself but the knock-on effects,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman, referring to a weaker economy and a delay in the Fed’s decision to taper.
The euro +0.34% jumped to $1.3623 from $1.3585 late Wednesday. The euro was just below its eight-month high on Wednesday, getting a boost as European Central Bank President Mario Draghi didn’t express concern about euro strength and Italian Prime Minister Enrico Letta won a vote of confidence. “[Draghi’s] comments seemed bullish,” said Chandler. “He showed no concern about lower-than expected inflation, strength of the euro or backing up of interest rates.”
On Thursday, data showed that euro-zone business activity grew at the fastest pace in more than two years in September, with Markit’s composite Purchasing Managers’ Index rising to 52.2 last month from 51.5 in August. Growth was visible in Italy and France, in addition to Germany.
The ICE dollar index -0.21% , a measure of the greenback’s strength against six other currencies, edged down to 79.737 from 79.875 late Wednesday, on track to decline for the fifth straight session. The WSJ Dollar Index -0.17% , a gauge of dollar strength against a broader basket of rivals, declined to 72.23 from 72.32.
