Dollar Sags on Possible US Government Shutdown

What initially had the potential to be a quiet end to a rather busy week did not pan out as expected as the US dollar sank with the deadline of a government shutdown looming and no resolution in sight. The dollar saw broad selling as US President Obama stated that while both parties were closer on a budget compromise, there was still work to be done with less than 30 hours until the government will in fact shutdown. The stalemate helped rouse the dollar bears who in conjunction with a weaker yen helped fuel the majors and crosses higher to end the trade week in Asia.

The EUR/USD, still basking in the glory of the earlier 0.25% rate hike, ploughed over 1.4400 highs which represented levels that haven’t been seen since the middle of January of 2010. Across the majors, the story was similar, with GBP/USD touching 1.6390 and the Aussie dollar touching yet another fresh high, this time near 1.0530. The dollar weakness also helped propel gold to fresh highs near $1466.90, while silver saw fresh 31 year highs once again as it crossed the $40.10 per ounce threshold. Oil also plodded higher with BCO/USD gaining almost 50 cents to $123.80, but WTI/USD remained mostly steady near $108.10.

The yen continued to see broad selling after a large aftershock shook the nation once again earlier in the day, and prospects of dim economic future for the nation set in. The Tokyo fix seemed to spark yen moves which saw the USD/JPY charge from 84.90 to 85.35, but still shy of the noted resistance at 85.50. The EUR/JPY once again produced 11 month highs through 122.60, while the GBP/JPY gained a big figure to end up just shy of the 139.60 level. The difference in interest rate yields will likely continue to tarnish the yen for the better part of this year as the nation tries to recover from recent devastation.

Ahead in London, the UK has PPI data while even later we’ll see Canadian employment data and housing starts followed on Saturday by Chinese trade balance. Have a great weekend…

Source: Forex.com

08.04.2011