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FOREX-Dollar at 2021 Highs Even as US Government Shutdown Looms

By on September 29, 2021 0

* Chart: Global exchange rates (Price updates)

By Iain Withers

LONDON, Sept. 29 (Reuters) – The dollar soared on Wednesday and peaked in 2021 against rival currencies, even as disputes in Washington over the US debt ceiling threatened to plunge the government into shutdown.

The greenback – the global reserve currency seen as a safe haven in times of market stress – has strengthened in recent days as investors instead focus on fears of a global slowdown, rising prices energy and higher US Treasury yields.

Traders are also concerned that the Federal Reserve will start to withdraw political support just as global growth slows.

Republicans in the U.S. Senate on Tuesday blocked an offer by Democrats President Joe Biden to avoid a potentially crippling credit default in the United States, with federal funding set to expire Thursday and authority to borrow around Oct. 18.

“Perhaps it is a sign of the confidence people have in the United States that even as the United States government rushes over a cliff like a car with a drunk driver getting beaten up by his even drunken passenger, the dollar can grow stronger, ”Marshall said. Gittler, head of investment research at BDSwiss, in a note.

“I guess it’s because people have seen this movie before and know how it ends.”

The dollar index – which measures the US currency against a basket of rivals – rose for the fourth consecutive trading day on Wednesday, up 0.3% to 93.990, its highest level since November 2020.

The dollar’s gains were more subdued, however, as risk sentiment recovered somewhat in the markets as European equities reversed some losses and oil prices fell after peaking nearly three years ago. day before.

The euro was one of the currencies to lose ground, falling 0.4% to an 11-month low at $ 1.16390.

The yen reacted little to the election of Fumio Kishida as head of the ruling Liberal Democratic Party in Japan and on its way to becoming the country’s next prime minister.

The yen, which is sensitive to US yields as higher rates can attract inflows from Japan, hit an 18-month low at 111.685 per dollar, before rebounding to 111.210.

The pound, which collapsed on Tuesday amid concerns over the economic impact of a gasoline shortage and a fuel rush, extended its losses to its lowest level since January to 1, $ 34,735.

Currency traders are watching closely for clues as to when governments and central banks around the world will cancel massive emergency support launched to fight the pandemic last year.

European Central Bank (ECB) President Christine Lagarde, Fed Chairman Jerome Powell, Bank of England Governor Andrew Bailey and Bank of Japan Governor Haruhiko Kuroda are panelists at a forum of ECB in Sintra, Portugal, at 3:45 p.m. GMT.

US Treasury yields have surged in recent days as the decline looms before the end of the year and inflation begins to look stiffer than previously thought.

(Reporting by Iain Withers, Additional reporting by Tom Westbrook in Singapore, Editing by Angus MacSwan, Kirsten Donovan)