Forex Market Update: Dollar Index Down as Government Shutdown Begins


The dollar index fell sharply on Tuesday as investors cut positive bets on the currency following partial U.S. government shutdown, which came in to effect from the midnight of October 1.

Lawmakers failed to build a consensus over the spending limit with both sides maintaining their respective stance. This is the first government shutdown in last seventeen years.

At last check, the Dollar Index, a measure on U.S. unit’s performance against a basket of six major traded currencies, fell 0.25% to 80.03.

Against the euro, the dollar fell to its eight-month low. However, surprisingly, global equity markets were trading higher with safe-haven assets such as gold edging lower.

At last check, the euro was up 0.16% against the dollar to trade at $1.3547.

Market participants expect the shutdown to be a temporary one though. Lawmakers have now about two weeks to resolve the issue before the next key mid-October deadline.

If the impasse still remains then the Federal Reserve will be disinclined to pullback its economic stimulating measures, which could further weaken the dollar. The Fed is scheduled to hold its next open market committee meeting (FOMC) on Oct. 29-Oct 30.

“We do not know how long this impasse in the U.S. will last. If it persists, there is a chance it will hurt economic growth and affect chances of Fed tapering,” said Daragh Maher, strategist at HSBC, according to Reuters.

“In the short term, it’s better to avoid the dollar,” added Maher

 








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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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