Stock Market Watch

Dollar Index Gains as Concerns over Debt Default Ease Significantly

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The dollar index jumped to its one-month high on Tuesday after lawmakers said that they were nearing a deal over both spending and debt ceiling issues.

The dollar index, which is measure on U.S. unit’s performance against a basket of six major currencies, rose 0.37% to 80.64.

The WSJ$ Index, whose currency basket is slightly broader, gained 0.24% to 72.90.

On Monday, Senator Harry Reid, a Democrat said he had a very productive discussions with counterpart Republican Mitch McConnell. Reid said that the deal could be reached as early as Tuesday.

The remarks boosted investors’ risk appetite. According to Reuters, citing one source familiar with the matter as saying, the deal would bring an end to a partial government shutdown and allow the Treasury to increase its borrowing limit for the short-term (at least mid-February). The nation was on verge of making a historic debt default had lawmakers not shown any flexibility over their respective stance.

“There is a glimpse of good news from the US government and markets are adding to risk positions,”

said Camilla Sutton, chief currency strategist, Scotiabank in Toronto, according to Reuters.

However, it is believed that the stop-gap deal will be supportive for the dollar only in the short term. This is because; negative impact from the shutdown might prompt the interest rates low in the U.S. In this backdrop, investors will look for higher yielding currencies which in turn weigh on the dollar.

 








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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