US Dollar Falls As Odds Of Tapering Drop USD/EUR, USD/JPY

Published: 17 Oct at 5 PM Tags: Euro, Dollar, Pound Sterling, America, Eurozone, USA, China,

The 16-day partial Federal shutdown may have ended yesterday as President Barack Obama signed an agreement to temporarily increase the US debt limit, but the repercussions of the event are likely to be of some duration.

Leading analysts have warned that the extended governmental closure will have a serious impact on US growth and could undermine all the progress made earlier in the year, so as the US deal caused a higher-risk-currency rally, the US Dollar lost its appeal and slumped against the majority of its most traded rivals.

The ‘Buck’ softened against the Euro and posted a notable decline against the Yen as all the political uncertainty led to the odds of the Federal Reserve tapering stimulus before the end of the year falling dramatically.

As well as posting its most significant drop against the Euro for a month, the US Dollar sank against the Pound.

According to chief economist Simon Smith; ‘A few months ago, it was a no-brainer that the Dollar was going to go up because of tapering – the dynamics have changed quite dramatically. It wasn’t a good idea for the Dollar. Obviously the uncertainties of the debt ceiling and government shutdown are only delayed. It’s going to be Dollar-negative in the next three months.’

The US Dollar will also be feeling the pressure in the days ahead as data like the US non-farm payrolls report finally gets published.

If figures surprise to the upside, intimating that the US economic recovery was gaining momentum before the shut down, it could boost the ‘Greenback’ modestly, but easing is still unlikely to be trimmed before 2014.

The US Dollar was also adversely affected by today’s initial jobless claims report, which showed the amount of people claiming first time employment benefits increased by more-than-forecast in the week ending October 4th.

Overnight, China’s GDP figures could inspire significant market movement.

As of 17:00 GMT the US Dollar was trading against the Pound in the region of 0.6193
As of Thursday, 17th October 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1822, GBP USD exchange rate was 1.6159, and GBP CNY exchange rate was 9.8539.

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