Dollar Falls on Government Shutdown Worries

Features Reuters

The dollar fell on Wednesday as concerns about a potential U.S. government shutdown left investors wary of buying the currency.

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Authorisation for the U.S. government to spend money above the current debt limit runs out on Sept. 30, unless Congress passes a "continuing resolution" to keep the government running. U.S. politicians have not yet found a common ground.

"There is a deep reluctance to buy dollars until the picture around the debt ceiling becomes clearer," said Derek Halpenny, European head of global currency research.

The dollar fell 0.2 percent against a basket of currencies to 80.563.

The euro was up 0.25 percent at $1.3509. It was helped by data showing consumer confidence in Germany at a six-year high and morale in Italy at its strongest in more than two years.

This took the euro closer to last week's peak of $1.3569, hit after the U.S. Federal Reserve's surprise decision to keep its bond-buying stimulus intact. Traders reported strong chart support at $1.3450.

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A lack of clarity over how long the U.S. central bank will delay scaling back stimulus has weighed on the dollar.

However, euro gains were expected to be limited on concerns about the possibility of more euro zone monetary easing after European Central Bank President Mario Draghi this week spoke of the possibility of the ECB providing more cheap long-term loans.

"There are so many uncertainties... This is making people reluctant to go back into risk," said Ian Stannard, head of European currency strategy at Morgan Stanley.

The dollar was down 0.25 percent against the Japanese yen at 98.46 yen, pressured by an easing in U.S. government bond yields.

But the dollar rose against higher-yielding and riskier currencies. The Australian dollar was down 0.3 percent at $0.9362 while the New Zealand dollar - which was also pressured by a jump in the country's trade deficit - fell 0.6 percent to $0.8226.