Dollar mixed in Asian trade

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Tokyo - The dollar was mixed in Asia on Wednesday after a deal on US spending that aims to avoid a repeat of a paralysing government shutdown.

The greenback weakened slightly to 102.79 yen in Tokyo morning trade, from 102.81 yen in New York and above the 130-yen level in Asia on Tuesday.

The euro also slipped to 141.31 yen from 141.48 yen and $1.3747 from $1.3760.

Under a deal reached in October that ended a crippling 16-day shutdown, federal spending authority expires on January 15, when a new deal will need to be in force.

The two-year agreement reached on Tuesday sets the warring Democratic and Republican Parties on track for further cooperation on fiscal policy, ending the cycle of budget feuding that has marred Washington since 2011.

The challenge now is selling the agreement to sceptical conservatives and liberals in the Senate and House of Representatives.

The deal may boost expectations that the Federal Reserve will start scaling back its monetary easing programme after its policy meeting next week - a plus for the dollar.

“The US budget deal, while yet to be confirmed by Congress, is a major positive for the US dollar as it would remove the risk of another government shutdown, as well as bring clarity and improved growth outlook that would encourage the Fed to start the taper,” Credit Agricole said.

Investors are also keeping a close eye on US November retail sales data as a gauge for timing the Fed tapering. The central bank has said it would start drawing down on the scheme once the world's biggest economy was on a firm footing.

Despite slipping Wednesday, the euro has been notching up gains after the European Central Bank last week held off any new interest rate cuts despite prolonged low inflation.

That followed the ECB's surprise cut last month of its central refinancing rate by a quarter-point to counter the threat of deflation.

“The euro has been supported on the back of better-than-expected growth data as well as ECB members still not making a clearer case for additional policy action to be on the cards,” Credit Agricole said.

On Wednesday, EU finance ministers agreed to meet again next week to finalise details of a “Banking Union” meant to prevent failing lenders from ever again wrecking the economy.

Following more than 14 hours of talks, the ministers cited some progress but not enough, with agreement only on the general principles on one of the bloc's most ambitious projects. - AFP


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